Too much trade: The hidden problem of adverse selection

David de Meza, Francesco Reito and Diane Reyniers

Journal of Public Economics, 2021, vol. 204, issue C

Abstract: Adverse selection famously leads to the crowding out of socially beneficial trades. We show that even more trades may be simultaneously crowded in. The reason is that, in the absence of complete unravelling, “lemons” fetch more under adverse selection. It is demonstrated how these “bad” trades occur in insurance, credit and used-car markets, and some policy implications are discussed.

Keywords: JEL classification; C13; D14; D82 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272721001870
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Too much trade: the hidden problem of adverse selection (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:204:y:2021:i:c:s0047272721001870

DOI: 10.1016/j.jpubeco.2021.104551

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().