Must Sell

Luis Cabral and József Sákovics

Journal of Economics & Management Strategy, 1995, vol. 4, issue 1, 55-68

Abstract: Why are moving sales a successful and widespread phenomenon? How can it be optimal for a seller to disclose her low valuation for the item to be sold? We propose an explanation based on the “lemons problem” in bargaining with asymmetric information about quality. Disclosing a low valuation signals that there are significant gains from trade, so that trade takes place when it wouldn't otherwise, and all agents are made better off.

Date: 1995
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