Used car dealers can not tell which cars are good before buying them. The experiment is divided into four sessions. In session 1 the instructor leads the class through a thought experiment in which each student imagines himself as a used-car dealer who sets a price and can buy as many used cars as people will sell to him at that price. Session 2 begins by appointing 6 students as dealers and all others as used-car owners. Half of the used cars are designated as good and half are lemons.
Dealers post the prices they are willing to pay on the blackboard.
Car owners then sell their cars at the best price. Session 4 is similar to session 2 except that each car owner has a certificate indicating the quality of the car that each possesses. Bergstrom, Theodore and John H. Miller. Experiments with Economic Principles . A series of private and common value auctions are demonstrated.