Exploring Information Asymmetry and Fair-Trade Mechanisms for Sustainability in Taiwan’s Used Car Market

Abstract

This study examined information asymmetry comprising adverse selection and moral hazard and the role of fair-trade mechanisms in promoting sustainability in Taiwan’s used car market. Using a qualitative document analysis of literature, reports, and statistical data, the research found that adverse selection prevented buyers from distinguishing between high- and low-quality vehicles, driving higher-quality cars out of the market. Consequently, moral hazard intensified as sellers concealed defects for profit. However, enhanced information technology and greater market transparency helped mitigate asymmetry by enabling buyers to better assess product quality and strengthening regulatory oversight. The findings underscored key policy implications for market governance, fair-trade regulation, and sustainability accounting. Improved information disclosure and accountability enhanced consumer protection, reduced unethical behavior, and supported market efficiency and stability. As adverse selection and moral hazard diminished, the market evolved toward fairness and sustainability. Overall, the study connected information asymmetry with fair-trade policy, offering insights for regulators to strengthen disclosure standards and market transparency. It also emphasized the importance of sustainability accounting in reinforcing consumer trust, accountability, and long-term market resilience, providing valuable guidance for policymakers in designing balanced and transparent governance frameworks.