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Costs and benefits of dynamic trading in a lemons market

William Fuchs and Andrzej Skrzypacz

Review of Economic Dynamics, 2019, vol. 33, 105-127

Abstract: We study a dynamic market with asymmetric information that creates the lemons problem. We compare efficiency of the market under different assumptions about the timing of trade. We identify positive and negative aspects of dynamic trading, describe the optimal market design under regularity conditions and show that continuous-time trading can always be improved upon if sellers are present at t=0. Instead, continuous trading is optimal if sellers arrive stochastically over time. (Copyright: Elsevier)

Keywords: Market design; Adverse selection; Trading frequency; Bankruptcy (search for similar items in EconPapers)
JEL-codes: D82 G14 G18 D02 D86 E58 E60 G01 (search for similar items in EconPapers)
Date: 2019
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http://dx.doi.org/10.1016/j.red.2019.03.002
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Working Paper: Costs and Benefits of Dynamic Trading in a Lemons Market (2013) Downloads
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DOI: 10.1016/j.red.2019.03.002

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