1 research outputs found
Turning Lemons into Peaches using Secure Computation
In many cases, assessing the quality of goods is hard. For example, when
purchasing a car, it is hard to measure how pollutant the car is since there
are infinitely many driving conditions to be tested. Typically, these
situations are considered under the umbrella of information asymmetry and as
Akelrof showed may lead to a market of lemons. However, we argue that in many
of these situations, the problem is not the missing information but the
computational challenge of obtaining it. In a nut-shell, if verifying the value
of goods requires a large amount of computation or even infinite amounts of
computation, the buyer is forced to use a finite test that samples, in some
sense, the quality of the goods. However, if the seller knows the test, then
the seller can over-fit the test and create goods that pass the quality test
despite not having the desired quality. We show different solutions to this
situation including a novel approach that uses secure computation to hide the
test from the seller to prevent over-fitting