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General equilibrium in markets for lemons

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  • Correia-da-Silva, João

Abstract

This paper studies exchange economies in which agents have differential information about the goods that the other agents bring to the market. To study such a setting, it is useful to distinguish goods not only by their physical characteristics, but also by the agent that brings them to the market. Equilibrium is shown to exist, with agents receiving the cheapest bundle among those that they cannot distinguish from the truthful delivery. An example is presented as an illustration.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 48 (2012)
Issue (Month): 3 ()
Pages: 187-195

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Handle: RePEc:eee:mateco:v:48:y:2012:i:3:p:187-195

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Web page: http://www.elsevier.com/locate/jmateco

Related research

Keywords: General equilibrium; Asymmetric information; Adverse selection; Uncertain delivery; Delivery rates;

References

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  1. P. Dubey & J. Geanakoplos & M . Shubik, 2001. "Default and Punishment in General Equilibrium," Department of Economics Working Papers, Stony Brook University, Department of Economics 01-07, Stony Brook University, Department of Economics.
  2. MINELLI, Enrico & POLEMARCHAKIS, Heracles, 1999. "Nash-Walras equilibria of a large economy," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1999043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Douglas Gale, 1996. "Equilibria and Pareto optima of markets with adverse selection (*)," Economic Theory, Springer, Springer, vol. 7(2), pages 207-235.
  4. Edward C Prescott & Robert M Townsend, 1997. "General Competitive Analysis in an Economy with Private Information," Levine's Working Paper Archive 1578, David K. Levine.
  5. Pradeep Dubey & John Geanakoplos, 2002. "Competitive Pooling: Rothschild-Stiglitz Reconsidered," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(4), pages 1529-1570, November.
  6. Correia-da-Silva, João & Hervés-Beloso, Carlos, 2008. "Subjective expectations equilibrium in economies with uncertain delivery," Journal of Mathematical Economics, Elsevier, Elsevier, vol. 44(7-8), pages 641-650, July.
  7. Pradeep Dubey & John Geanakoplos, 2001. "Competitive Pooling: Rothschild-Stiglitz Reconsidered," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1346R2, Cowles Foundation for Research in Economics, Yale University, revised Feb 2002.
  8. Edward C Prescott & Robert M Townsend, 2010. "Pareto Optima and Competitive Equilibria With Adverse Selection and Moral Hazard," Levine's Working Paper Archive 2069, David K. Levine.
  9. Aldo Rustichini & Paolo Siconolfi, 2008. "General equilibrium in economies with adverse selection," Economic Theory, Springer, Springer, vol. 37(1), pages 1-29, October.
  10. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(3), pages 488-500, August.
  11. Alberto Bisin & Piero Gottardi, 2006. "Efficient Competitive Equilibria with Adverse Selection," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 114(3), pages 485-516, June.
  12. Alberto Bisin & Piero Gottardi, 1998. "Competitive Equilibria with Asymmetric Information," Levine's Working Paper Archive 2062, David K. Levine.
  13. João Correia-da-Silva & Carlos Hervés-Beloso, 2006. "Prudent Expectations Equilibrium in Economies with Uncertain Delivery," Levine's Bibliography 321307000000000099, UCLA Department of Economics.
  14. Martin Meier & Enrico Minelli & Herakles Polemarchakis, 2009. "Competitive Markets with Private Information on Both Sides," Working Papers, University of Brescia, Department of Economics 0917, University of Brescia, Department of Economics.
  15. Gale, Douglas, 1992. "A Walrasian Theory of Markets with Adverse Selection," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 59(2), pages 229-55, April.
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Cited by:
  1. João Correia-da-Silva & Carlos Hervés-Beloso, 2014. "Irrelevance of private information in two-period economies with more goods than states of nature," Economic Theory, Springer, Springer, vol. 55(2), pages 439-455, February.
  2. João Correia da Silva, 2014. "Two-period economies with price-contingent deliveries," FEP Working Papers, Universidade do Porto, Faculdade de Economia do Porto 529, Universidade do Porto, Faculdade de Economia do Porto.
  3. Martin Meier & Enrico Minelli & Herakles Polemarchakis, 2014. "Competitive markets with private information on both sides," Economic Theory, Springer, Springer, vol. 55(2), pages 257-280, February.

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