The efficiency of decentralized and centralized markets for lemons
In markets with adverse selection, when average quality is low and frictions are small decentralized trade produces a greater surplus than predicted by the competitive model: under decentralized trade some high-quality units of the good trade whereas, due to the "lemons problem", only low-quality units trade in the competitive equilibrium. This suggests a reason why these markets are often decentralized. Remarkably, under some conditions payoffs are competitive as frictions vanish, even though all qualities trade.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bond, Eric W, 1982. "A Direct Test of the "Lemons" Model: The Market for Used Pickup Trucks," American Economic Review, American Economic Association, vol. 72(4), pages 836-840, September.
- Gale, Douglas, 1987.
"Limit theorems for markets with sequential bargaining,"
Journal of Economic Theory,
Elsevier, vol. 43(1), pages 20-54, October.
- Douglas Gale, 2010. "Limit theorems for markets with sequential bargaining," Levine's Working Paper Archive 621, David K. Levine.
- Douglas Gale, 1996. "Equilibria and Pareto optima of markets with adverse selection (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 207-235.
- Gale, Douglas, 1996. "Equilibria and Pareto Optima of Markets with Adverse Selection," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 207-235, February.
- Douglas Gale, 1994. "Equilibria and Pareto Optima of Markets with Adverse Selection," Papers 0046, Boston University - Industry Studies Programme.
- Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
- Moreno, Diego & Wooders, John, 2002. "Prices, Delay, and the Dynamics of Trade," Journal of Economic Theory, Elsevier, vol. 104(2), pages 304-339, June.
- John Wooders & Diego Moreno, 2001. "Prices, Delay, and the Dynamics of Trade," Economics Bulletin, AccessEcon, vol. 28(7), pages 1.
- Wooders, John & Moreno, Diego, 1999. "Prices, delay and the dynamics of trade," UC3M Working papers. Economics 7217, Universidad Carlos III de Madrid. Departamento de Economía.
- Bester, Helmut, 1993. "Bargaining versus Price Competition in Markets with Quality Uncertainty," American Economic Review, American Economic Association, vol. 83(1), pages 278-288, March.
- Max R. Blouin & Roberto Serrano, 2001. "A Decentralized Market with Common Values Uncertainty: Non-Steady States," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 323-346.
- Max Blouin & Roberto Serrano, 1998. "A Decentralized Market with Common Values Uncertainty: Non-Steady States," Working Papers 98-5, Brown University, Department of Economics, revised 10 Aug 1998.
- Wooders, John, 1998. "Walrasian equilibrium in matching models," Mathematical Social Sciences, Elsevier, vol. 35(3), pages 245-259, May.
- Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-1150, September.
- Arial Rubinstein & Asher Wolinsky, 1985. "Equilibrium in a Market with Sequential Bargaining," Levine's Working Paper Archive 623, David K. Levine.
- Max Blouin, 2001. "Equilibrium in a Decentralized Market with Adverse Selection," Cahiers de recherche CREFE / CREFE Working Papers 128, CREFE, Université du Québec à Montréal, revised Mar 2001. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:cte:werepe:we014005. 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: (Ana Poveda)
If references are entirely missing, you can add them using this form.