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Investing to access an adverse selection market

Sander Heinsalu ()

International Journal of Industrial Organization, 2020, vol. 72, issue C

Abstract: I analyse a market with asymmetric information and interdependent values. Accessing the market is costly and stochastic, e.g. requires lobbying, licences or R&D. For a range of parameter values, interventions that raise production or entry costs for all seller types increase trade, investment and payoff for all types. This effect is driven by a novel feedback loop between the market composition and the investment in access.

Keywords: Lemons market; Common values; Costly entry; Market composition; Asymmetric information (search for similar items in EconPapers)
JEL-codes: C72 D82 D83 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.ijindorg.2020.102660

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Handle: RePEc:eee:indorg:v:72:y:2020:i:c:s0167718720300837