EconPapers    
Economics at your fingertips  
 

DECENTRALIZED TRADE MITIGATES THE LEMONS PROBLEM

Diego Moreno () and John Wooders ()

International Economic Review, 2010, vol. 51, issue 2, 383-399

Abstract: In markets with adverse selection, only low-quality units trade in the competitive equilibrium when the average quality of the good held by sellers is low. We show that under decentralized trade, however, both high- and low-quality units trade, although with delay. Moreover, when frictions are small, the surplus realized is greater than the (static) competitive surplus. Thus, decentralized trade mitigates the lemons problem. Remarkably, payoffs are competitive as frictions vanish, even though both high- and low-quality units continue to trade, and there is trade at several prices. Copyright (2010) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (18) Track citations by RSS feed

Downloads: (external link)
http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-2354.2010.00584.x link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Decentralized trade mitigates the lemons problem (2007) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ier:iecrev:v:51:y:2010:i:2:p:383-399

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598

Access Statistics for this article

International Economic Review is currently edited by Harold L. Cole

More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing ().

 
Page updated 2020-03-29
Handle: RePEc:ier:iecrev:v:51:y:2010:i:2:p:383-399