Cycles and Multiple Equilibria in the Market for Durable Lemons

Maarten C.W. Janssen () and Vladimir Karamychev
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Maarten C.W. Janssen: Erasmus University Rotterdam

No 00-025/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This discussion paper resulted in an article in Economic Theory (2002). Vol. 20, issue 3, pages 579-601.

We investigate the nature of market failure in a dynamic version of Akerlof (1970) where identical cohorts of a durable good enter the market over time. In the dynamic model, equilibria with qualitatively different properties emerge. Typically, in equilibria of the dynamic model, sellers with higher quality wait in order to sell and wait more than sellers of lower quality. Our main resultis that for any distribution of quality that there exist an infinite number of cyclical equilibria where all goods are traded within a certain number of periods after entering the market.

Keywords: Dynamic Trading; Asymmetric Information; Entry; Durable Goods (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Date: 2000-04-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Cycles and multiple equilibria in the market for durable lemons (2002)
Working Paper: Cycles and Multiple Equilibria in the Market for Durable Lemons (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20000025

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