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Must Sell

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  • Cabral, Luis
  • Sakovics, Jozsef

Abstract

Why are moving sales a successful and widespread phenomenon? How can it be optimal for a seller to disclose her low valuation for the item to be sold? We propose an explanation based on the "lemons problem" in bargaining with asymmetric information about quality. Disclosing a low valuation signals that there are significant gains from trade, so that trade takes place when it wouldn't otherwise, and all agents are made better off. Copyright 1995 by MIT Press.

Suggested Citation

  • Cabral, Luis & Sakovics, Jozsef, 1995. "Must Sell," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(1), pages 55-68, Spring.
  • Handle: RePEc:bla:jemstr:v:4:y:1995:i:1:p:55-68
    DOI: 10.1111/j.1430-9134.1995.00055.x
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    References listed on IDEAS

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    1. Robert Evans, 1989. "Sequential Bargaining with Correlated Values," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(4), pages 499-510.
    2. Farrell, Joseph & Gibbons, Robert, 1989. "Cheap talk can matter in bargaining," Journal of Economic Theory, Elsevier, vol. 48(1), pages 221-237, June.
    3. Genesove, David, 1993. "Adverse Selection in the Wholesale Used Car Market," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 644-665, August.
    4. Farrell, Joseph & Gibbons, Robert, 1988. "Cheap Talk Can Matter in Bargaining," Department of Economics, Working Paper Series qt3qz786xq, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    5. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
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    Cited by:

    1. Matthew Backus & Thomas Blakee & Brad Larsen & Steven Tadelis, 2020. "Sequential Bargaining in the Field: Evidence from Millions of Online Bargaining Interactions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(3), pages 1319-1361.
    2. Matthew Backus & Tom Blake & Steven Tadelis, 2015. "Cheap Talk, Round Numbers, and the Economics of Negotiation," NBER Working Papers 21285, National Bureau of Economic Research, Inc.

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