Dynamic Adverse Selection and the Supply Size
In this paper we examine the problem of dynamic adverse selection in a stylized market where the quality of goods is a seller’s private information while the realized distribution of qualities is public information. We show that in equilibrium all goods can be traded if the size of the supply is publicly available to market participants. Moreover, we show that if exchanges can take place frequently enough, then agents roughly enjoy the entire potential surplus from exchanges. We illustrate these findings with a dynamic model of trade where buyers and sellers repeatedly interact over time. We also identify circumstances under which only full trade equilibria exist. Further, we give conditions for full trade to obtain when the realized distribution of qualities is not public information and when new goods enter the market at later stages.
|Date of creation:||Apr 2014|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.recent.unimore.it/|
More information through EDIRC
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.:
- Raymond Deneckere & Meng-Yu Liang, 2006. "Bargaining with Interdependent Values," Econometrica, Econometric Society, vol. 74(5), pages 1309-1364, 09.
- I. Hendel & A. Lizzeri, 1999.
"The Role of Leasing under Adverse Selection,"
Princeton Economic Theory Papers
99f7, Economics Department, Princeton University.
- Igal Hendel & Alessandro Lizzeri & Marciano Siniscalchi, 2005.
"Efficient Sorting in a Dynamic Adverse-Selection Model,"
Review of Economic Studies,
Oxford University Press, vol. 72(2), pages 467-497.
- Alessandro Lizzeri, 2003. "Efficient Sorting in a Dynamic Adverse Selection Model," Theory workshop papers 505798000000000098, UCLA Department of Economics.
- I. Hendel & A. Lizzeri & M. Siniscalchi, 2002. "Efficient Sorting in a Dynamic Adverse-Selection Model," Princeton Economic Theory Working Papers 9879581e6de5e61fcfb0cd82b, David K. Levine.
- David K. Levine & Wolfgang Pesendorfer, 1995.
"When Are Agents Negligible?,"
Levine's Working Paper Archive
96, David K. Levine.
- Mathias Dewatripont & Patrick Bolton, 2005.
ULB Institutional Repository
2013/9543, ULB -- Universite Libre de Bruxelles.
- Braz Camargo & Benjamin Lester, 2011.
"Trading dynamics in decentralized markets with adverse selection,"
11-36, Federal Reserve Bank of Philadelphia.
- Camargo, Braz & Lester, Benjamin, 2014. "Trading dynamics in decentralized markets with adverse selection," Journal of Economic Theory, Elsevier, vol. 153(C), pages 534-568.
- Ben Lester & Braz Camargo, 2011. "Trading Dynamics in Decentralized Markets with Adverse Selection," 2011 Meeting Papers 1300, Society for Economic Dynamics.
- Ben Lester & Braz Camargo, 2010. "Trading Dynamics in Decentralized Markets with Adverse Selection," 2010 Meeting Papers 488, Society for Economic Dynamics.
- Daniel R. Vincent, 1988.
"Bargaining with Common Values,"
775, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Justin P. Johnson & Michael Waldman, 2010. "Leasing, Lemons, and Moral Hazard," Journal of Law and Economics, University of Chicago Press, vol. 53(2), pages 307-328, 05.
- Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
- Johnson, Justin P & Waldman, Michael, 2003. " Leasing, Lemons, and Buybacks," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 247-65, Summer.
- Vladimir A. Karamychev, 2000.
"Cycles and Multiple Equilibria in the Market for Durable Lemons,"
Econometric Society World Congress 2000 Contributed Papers
0876, Econometric Society.
- 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.
- Alessandro Lizzeri & Igal Hendel, 1999.
"Adverse Selection in Durable Goods Markets,"
American Economic Review,
American Economic Association, vol. 89(5), pages 1097-1115, December.
- Jonathan Levin, 2001.
"Information and the Market for Lemons,"
01004, Stanford University, Department of Economics.
- von der Fehr, Nils-Henrik Morch & Kuhn, Kai-Uwe, 1995. "Coase versus Pacman: Who Eats Whom in the Durable-Goods Monopoly?," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 785-812, August.
- Evans, Robert, 1989. "Sequential Bargaining with Correlated Values," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 499-510, October.
- Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
- Diego Moreno & John Wooders, 2013.
"Dynamic Markets for Lemons: Performance, Liquidity, and Policy Intervention,"
Working Paper Series
5, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
- Diego Moreno & John Wooders, 2012. "Dynamic markets for lemons : performance, liquidity, and policy intervention," Economics Working Papers we1226, Universidad Carlos III, Departamento de Economía.
- Anke S. Kessler, 1996.
"Revisiting the Lemons Market,"
Discussion Paper Serie A
517, University of Bonn, Germany.
- Diego Moreno & John Wooders, 2010.
"Decentralized Trade Mitigates The Lemons Problem,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 383-399, 05.
- Timothy N. Cason & Tridib Sharma, 2001. "Durable Goods, Coasian Dynamics, and Uncertainty: Theory and Experiments," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1311-1354, December.
- Faruk Gul & Hugo Sonnenschein & Robert Wilson, 2010.
"Foundations of Dynamic Monopoly and the Coase Conjecture,"
Levine's Working Paper Archive
232, David K. Levine.
- Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June.
- Marco Ottaviani & Andrea Prat, 2001.
"The Value of Public Information in Monopoly,"
Econometric Society, vol. 69(6), pages 1673-1683, November.
- Marco Ottaviani, 2000. "The Value of Public Information in Monopoly," Econometric Society World Congress 2000 Contributed Papers 1479, Econometric Society.
- Anthony Creane, 2008. "A note on welfare-improving ignorance about quality," Economic Theory, Springer, vol. 34(3), pages 585-590, March.
- Max R. Blouin, 2003. "Equilibrium in a decentralized market with adverse selection," Economic Theory, Springer, vol. 22(2), pages 245-262, 09.
- 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.
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
- Maarten Janssen & Santanu Roy, 2004. "On durable goods markets with entry and adverse selection," Canadian Journal of Economics, Canadian Economics Association, vol. 37(3), pages 552-589, August.
- Maarten C. W. Janssen & Santanu Roy, 2002. "Dynamic Trading in a Durable Good Market with Asymmetric Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 257-282, February.
- Lewis, Tracy R & Sappington, David E M, 1994. "Supplying Information to Facilitate Price Discrimination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 309-27, May.
- Brendan Daley & Brett Green, 2012. "Waiting for News in the Market for Lemons," Econometrica, Econometric Society, vol. 80(4), pages 1433-1504, 07.
- Sarath, Bharat, 1996. "Public Information Quality with Monopolistic Sellers," Games and Economic Behavior, Elsevier, vol. 16(2), pages 261-279, October.
- Johannes Hörner & Nicolas Vieille, 2009. "Public vs. Private Offers in the Market for Lemons," Econometrica, Econometric Society, vol. 77(1), pages 29-69, 01.
- Gul, Faruk & Sonnenschein, Hugo, 1988. "On Delay in Bargaining with One-Sided Uncertainty," Econometrica, Econometric Society, vol. 56(3), pages 601-11, May.
When requesting a correction, please mention this item's handle: RePEc:mod:recent:099. 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: ()
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.