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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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0876.
Date of creation: 01 Aug 2000
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Other versions of this item:
- Maarten C. W. Janssen & Vladimir A. Karamychev, 2002. "Cycles and multiple equilibria in the market for durable lemons," Economic Theory, 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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- 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.
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"Adverse Selection in Durable Goods Markets,"
NBER Working Papers
6194, National Bureau of Economic Research, Inc.
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- Vettas, Nikolaos, 1997. "On the Informational Role of Quantities: Durable Goods and Consumers' Word-of-Mouth Communication," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 915-44, November.
- Andrikopoulos, Athanasios & Markellos, Raphael. N, 2012. "Dynamic interaction between markets for leasing and selling automobiles," MPRA Paper 45225, University Library of Munich, Germany.
- Fuchs, William & Skrzypacz, Andrzej, 2013. "Costs and Benefits of Dynamic Trading in a Lemons Market," Research Papers 2133, Stanford University, Graduate School of Business.
- Maarten C.W. Janssen & Vladimir Karamychev, 2000. "Continuous Time Trading in Markets with Adverse Selection," Tinbergen Institute Discussion Papers 00-109/1, Tinbergen Institute.
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