IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

A Markovian Model Market - Akerlof's Lemmons and the Asymmetry of Information

  • Paulo F. C. Tilles
  • Fernando F. Ferreira
  • Gerson Francisco
  • Carlos de B. Pereira
  • Flavia Mori Sarti
Registered author(s):

    In this work we study an economic agent based model under different asymmetric information degrees. This model is quite simple and can be treated analytically since the buyers evaluate the quality of a certain good taking into account only the quality of the last good purchased plus her perceptive capacity \beta . As a consequence the system evolves according to a stationary Markovian stochastic process. The value of a product offered by the seller increases with quality according to the exponent \alpha, which is a measure of technology. It incorporates all the technological capacity of production systems such as education, scientific development and techniques that change the productivity growth. The technological level plays an important role to explain how the asymmetry of information may affect the market evolution in this model. We observe that, for high technological levels, the market can control adverse selection. The model allows us to compute the maximum asymmetric information degree before market collapse. Below this critical point the market evolves during a very limited time and then dies out completely. When \beta is closer to 1(symmetric information), the market becomes more profitable for high quality goods, although high and low quality markets coexist. All the results we obtained from the model are analytical and the maximum asymmetric information level is a consequence of an ergodicity breakdown in the process of quality evaluation.

    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://arxiv.org/pdf/0905.0468
    File Function: Latest version
    Download Restriction: no

    Paper provided by arXiv.org in its series Papers with number 0905.0468.

    as
    in new window

    Length:
    Date of creation: May 2009
    Date of revision:
    Handle: RePEc:arx:papers:0905.0468
    Contact details of provider: Web page: http://arxiv.org/

    No references listed on IDEAS
    You can help add them by filling out this form.

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

    When requesting a correction, please mention this item's handle: RePEc:arx:papers:0905.0468. 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: (arXiv administrators)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.