The Horse Market

A horse trader offered to buy horses at a fair price. Owners of sick horses rushed to sell. Owners of healthy horses thought, “My horse is worth more than his offer,” and stayed home.

The trader, burned by sick horses, lowered his price. Now even moderately healthy horses stayed off the market. Only the sickest remained.

He lowered the price again. More owners withdrew. Soon, no horse at market was worth buying at any price.

The market didn’t fail because of fraud. It failed because the people with the best goods had the least reason to participate.