We analyze a dynamic version of the Akerlof-Wilson "lemons" market in a competitive durable good setting. There is a fixed set of sellers with private information about the quality of their wares. The price mechanism sorts sellers of different qualities into different time periods--prices and average quality of goods traded increase over time. Goods of "all" qualities are traded in finite time. Market failure arises because of the waiting involved--particularly for sellers of better quality. The equilibrium path may exhibit intermediate breaks in trading. Copyright 2002 by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Resarch Association
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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 43 (2002) Issue (Month): 1 (February) Pages: 257-282 Download reference. The following formats are available: HTML
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