Cycles and Multiple Equilibria in the Market for Durable Lemons
AbstractWe investigate the nature of market failure in a dynamic version of Akerlof (1970) where identical cohorts of a durable good enter the market over time. In the dynamic model, equilibria with qualitatively different properties emerge. Typically, in equilibria of the dynamic model, sellers with higher quality wait in order to sell and wait more than sellers of lower quality. Among other things, we show for any distribution of quality that there exist an infinite number of cyclical equilibria where all goods are traded within a certain number of periods after entering the market.
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Date of creation: 01 Aug 2000
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- Maarten C. W. Janssen & Vladimir A. Karamychev, 2002. "Cycles and multiple equilibria in the market for durable lemons," Economic Theory, Springer, Springer, vol. 20(3), pages 579-601.
- Maarten C.W. Janssen & Vladimir Karamychev, 2000. "Cycles and Multiple Equilibria in the Market for Durable Lemons," Tinbergen Institute Discussion Papers 00-025/1, Tinbergen Institute.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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