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.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- Fuchs, William & Skrzypacz, Andrzej, 2013. "Costs and Benefits of Dynamic Trading in a Lemons Market," Research Papers 2133, Stanford University, Graduate School of Business.
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