Dynamic sorting in durable goods markets with buyer heterogeneity

Santanu Roy

Canadian Journal of Economics, 2014, vol. 47, issue 3, 1010-1031

Abstract: In a competitive dynamic durable good market where sellers have private information about quality, I identify certain inefficiencies that arise due to heterogeneity in buyers' valuations . Even if the market induces dynamic sorting among sellers and all goods are eventually traded, inefficiency can arise because high valuation buyers buy early when lowquality goods are sold, while highquality goods are allocated to low valuation buyers that buy later. This misallocation adds to the inefficiency caused by delay in trading. Under certain circumstances, highquality goods may never be traded as in a static market.

JEL-codes: D82 L15 (search for similar items in EconPapers)
Date: 2014
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