Adverse selection in asset markets: Theory and evidence from the Indian market for cows
Journal of Development Economics, 2017, vol. 129, issue C, 58-72
Dairy cows cycle through periods where their quality is more observable (the milking phase), and where their quality is less observable (the dry phase). This variation in quality observability creates the potential for an adverse selection problem. I develop a theoretical model of trade in dry and milking cows and find empirical evidence consistent with the adverse selection theory. In particular, dry animal prices fall less in response to negative shocks relative to milking animal prices, which is consistent with the model's prediction that negative shocks actually help the dry animal market by pushing more high quality owners to sell.
Keywords: Adverse selection; Agricultural markets; Livestock; India (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:129:y:2017:i:c:p:58-72
Access Statistics for this article
Journal of Development Economics is currently edited by M. R. Rosenzweig
More articles in Journal of Development Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().