We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Competitive search markets for durable goods.
- Authors
Inderst, Roman; Müller, Holger M.
- Abstract
This paper considers a dynamic version of Akerlof's (1970) lemons problem where buyers and sellers must engage in search to find a trading partner. We show that if goods are durable, the market itself may provide a natural sorting mechanism. In equilibrium, high-quality goods sell at a higher price than lowquality goods but also circulate longer. This accords with the common wisdom that sellers who want to sell fast may have to accept a lower price. We then compare the equilibrium outcomes under private information with those under complete information. Surprisingly, we find that for a large range of parameter values the quilibrium outcomes under the two information regimes coincide, despite the fact that circulation time is used to achieve separation.
- Subjects
DURABLE consumer goods; ECONOMIC equilibrium; COMPETITION
- Publication
Economic Theory, 2002, Vol 19, Issue 3, p599
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/s001990000162