Abstract
Between 1982 and 1994 all fifty states enacted new car warranty legislation commonly known as ‘lemon laws’. These statutes provide that a consumer who buys a lemon (defined as ‘a chronically defective new car that cannot be repaired with a reasonable effort’) is entitled to receive a replacement car or full refund from the car's manufacturer. We ask why these laws were enacted, exploring both economic and political rationales. The analysis demonstrates that reasonable economic arguments can be advanced for the legislation, both pro and con, and concludes that the legislation resulted most directly from an alliance of consumer advocates and automobile dealers at the expense of manufacturers. This case study illustrates the interplay of legal, political, and economic factors that shape consumer legislation generally.
Published Version
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