An Ss Model with Adverse Selection
Posted: 3 May 2004
There are 2 versions of this paper
An Ss Model with Adverse Selection
NBER Working Paper No. w8030
Number of pages: 29
Posted: 02 Dec 2000
Last Revised: 27 May 2004
Downloads
39
Abstract
We present a model of the market for a used durable in which agents face fixed costs of adjustment, the magnitude of which depends on the degree of adverse selection in the secondary market. We find that, unlike typical models, the sS bands in our model contract as the variance of the shock increases. We also analyze a dynamic version of the model in which agents are allowed to make decisions that are conditional on the age of the durable. We find that, as the durable ages, the lemons problem tends to decline in importance, and the sS bands contract.
Suggested Citation: Suggested Citation
House, Christopher L. and Leahy, John V., An Ss Model with Adverse Selection. Available at SSRN: https://ssrn.com/abstract=539022
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.