Dynamic Trading in a Durable Good Market with Asymmetric Information

@inproceedings{MAARTEN1999DynamicTI,
  title={Dynamic Trading in a Durable Good Market with Asymmetric Information},
  author={MAARTEN and C. WebsterK.CaveneeKaren and Janssen and Santanu Roy},
  year={1999}
}
We analyze a dynamic version of the Akerlof±Wilson ``lemons'' market in a competitive durable good setting. There is a ®xed set of sellers with private information about the quality of their wares. The price mechanism sorts sellers of different qualities into different time periodsÐprices and average quality of goods traded increase over time. Goods of all qualities are traded in ®nite time. Market failure arises because of the waiting involvedÐparticularly for sellers of better quality. The… CONTINUE READING
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