Advanced Search
MyIDEAS: Login to save this article or follow this journal

Efficient Sorting in a Dynamic Adverse-Selection Model

Contents:

Author Info

  • Igal Hendel
  • Alessandro Lizzeri
  • Marciano Siniscalchi

Abstract

We discuss a class of markets for durable goods where efficiency (or approximate efficiency) is obtained despite the presence of information asymmetries. In the model, the number of times a good has changed hands (the vintage of the good) is an accurate signal of its quality, each consumer self-selects into obtaining the vintage that the social planner would have assigned to her, and consumers' equilibrium trading behaviour in secondary markets is not subject to adverse selection. We show that producers have the incentive to choose contracts that lead to the efficient allocation, and to supply the efficient output. We also provide a contrast between leasing contracts, resale contracts, and different kinds of rental contracts. Resale contracts do not lead to the efficient allocation. A specific kind of rental contract provides the appropriate incentives to consumers. Copyright 2005, Wiley-Blackwell.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1111/j.1467-937X.2005.00340.x
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 72 (2005)
Issue (Month): 2 ()
Pages: 467-497

as in new window
Handle: RePEc:oup:restud:v:72:y:2005:i:2:p:467-497

Contact details of provider:

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. I. Hendel & A. Lizzeri, 1999. "The Role of Leasing under Adverse Selection," Princeton Economic Theory Papers 99f7, Economics Department, Princeton University.
  2. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  3. Alessandro Lizzeri & Igal Hendel, 1999. "Adverse Selection in Durable Goods Markets," American Economic Review, American Economic Association, vol. 89(5), pages 1097-1115, December.
  4. Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June.
  5. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  6. Maarten Janssen & Santanu Roy, 2004. "On durable goods markets with entry and adverse selection," Canadian Journal of Economics, Canadian Economics Association, vol. 37(3), pages 552-589, August.
  7. Dmitriy Stolyarov, 2002. "Turnover of Used Durables in a Stationary Equilibrium: Are Older Goods Traded More?," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1390-1413, December.
  8. Christopher L. House & John V. Leahy, 2004. "An sS Model with Adverse Selection," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 581-614, June.
  9. Igal Hendel & Alessandro Lizzeri & Marciano Siniscalchi, 2005. "Efficient Sorting in a Dynamic Adverse-Selection Model," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 467-497.
  10. Maarten C. W. Janssen & Santanu Roy, 2002. "Dynamic Trading in a Durable Good Market with Asymmetric Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 257-282, February.
  11. Greenwald, Bruce C, 1986. "Adverse Selection in the Labour Market," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 325-47, July.
  12. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Igal Hendel & Alessandro Lizzeri & Marciano Siniscalchi, 2005. "Efficient Sorting in a Dynamic Adverse-Selection Model," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 467-497.
  2. Moore, John, 2013. "Contagious Illiquidity I: Contagion through Time," SIRE Discussion Papers 2013-73, Scottish Institute for Research in Economics (SIRE).
  3. Engers, Maxim & Hartmann, Monica & Stern, Steven, 2009. "Are lemons really hot potatoes?," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 250-263, March.
  4. Pablo Kurlat, 2013. "Lemons Markets and the Transmission of Aggregate Shocks," American Economic Review, American Economic Association, vol. 103(4), pages 1463-89, June.
  5. J. Atsu Amegashie, 2013. "Consumers' Complaints, the Nature of Corruption, and Social Welfare," CESifo Working Paper Series 4295, CESifo Group Munich.
  6. Marco Battaglini, 2003. "Long-Term Contracting with Markovian Consumers," Theory workshop papers 505798000000000048, UCLA Department of Economics.
  7. Battaglini, Marco, 2005. "Optimality and Renegotiation in Dynamic Contracting," CEPR Discussion Papers 5014, C.E.P.R. Discussion Papers.
  8. Ennio Bilancini & Leonardo Boncinelli, 2014. "Dynamic Adverse Selection and the Supply Size," Center for Economic Research (RECent) 099, University of Modena and Reggio E., Dept. of Economics.
  9. Kawai, Keiichi, 2014. "Dynamic market for lemons with endogenous quality choice by the seller," Games and Economic Behavior, Elsevier, vol. 84(C), pages 152-162.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:72:y:2005:i:2:p:467-497. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.