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Uncertain delivery in markets for lemons

Author

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  • Joao Correia-da-Silva

    (CEMPRE and Faculdade de Economia, Universidade do Porto)

Abstract

The notion of uncertain delivery is extended to study exchange economies in which agents have different abilities to distinguish between goods (for example a car in good condition versus a car in bad condition). In this setting, it is useful to distinguish goods not only by their physical characteristics,but also by the agent that is bringing them to the market. Equilibrium is shown to exist, and characterized by the fact that agents always receive the cheapest bundle among those that they cannot distinguish from truthful delivery. Several examples are presented as an illustration.

Suggested Citation

  • Joao Correia-da-Silva, 2009. "Uncertain delivery in markets for lemons," FEP Working Papers 310, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:fepwps:310
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    File URL: http://www.fep.up.pt/investigacao/workingpapers/09.01.26_wp310.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    General equilibrium; Asymmetric information; Adverse selection; Uncertain delivery; Pool; Delivery rates;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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