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Must Sell

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  • Luís Cabral
  • József Sákovics

Abstract

Why are moving sales a successful and widespread phenomenon? How can it be optimal for a seller to disclose her low valuation for the item to be sold? We propose an explanation based on the “lemons problem” in bargaining with asymmetric information about quality. Disclosing a low valuation signals that there are significant gains from trade, so that trade takes place when it wouldn't otherwise, and all agents are made better off.

Suggested Citation

  • Luís Cabral & József Sákovics, 1995. "Must Sell," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(1), pages 55-68, March.
    • Handle: RePEc:bla:jemstr:v:4:y:1995:i:1:p:55-68
    DOI: 10.1111/j.1430-9134.1995.00055.x
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    References listed on IDEAS

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    1. Robert Evans, 1989. "Sequential Bargaining with Correlated Values," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(4), pages 499-510.
    2. Farrell, Joseph & Gibbons, Robert, 1989. "Cheap talk can matter in bargaining," Journal of Economic Theory, Elsevier, vol. 48(1), pages 221-237, June.
    3. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    4. Genesove, David, 1993. "Adverse Selection in the Wholesale Used Car Market," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 644-665, August.
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    Cited by:

    1. Matthew Backus & Thomas Blakee & Brad Larsen & Steven Tadelis, 2020. "Sequential Bargaining in the Field: Evidence from Millions of Online Bargaining Interactions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(3), pages 1319-1361.
    2. Matthew Backus & Tom Blake & Steven Tadelis, 2015. "Cheap Talk, Round Numbers, and the Economics of Negotiation," NBER Working Papers 21285, National Bureau of Economic Research, Inc.

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