Dynamic Trading in a Durable Good Market with Asymmetric Information

26 Pages Posted: 18 Mar 2003

See all articles by Maarten Janssen

Maarten Janssen

University of Vienna - Faculty of Business, Economics, and Statistics

Santanu Roy

Southern Methodist University (SMU) - Department of Economics

Abstract

We analyze a dynamic version of the Akerlof-Wilson "lemons" market in a competitive durable good setting. There is a fixed set of sellers with private information about the quality of their wares. The price mechanism sorts sellers of different qualities into different time periods-prices and average quality of goods traded increase over time. Goods of all qualities are traded in finite time. Market failure arises because of the waiting involved - particularly for sellers of better quality. The equilibrium path may exhibit intermediate breaks in trading.

Suggested Citation

Janssen, Maarten C. W. and Roy, Santanu, Dynamic Trading in a Durable Good Market with Asymmetric Information. Available at SSRN: https://ssrn.com/abstract=312528

Maarten C. W. Janssen (Contact Author)

University of Vienna - Faculty of Business, Economics, and Statistics ( email )

Vienna, A-1210
Austria

Santanu Roy

Southern Methodist University (SMU) - Department of Economics ( email )

Dallas, TX 75275
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
30
Abstract Views
865
PlumX Metrics