Physical Depreciation and Discounting in Dynamic Markets with Adverse Selection

Maarten C. W. Janssen and Vladimir Karamychev
Additional contact information
Maarten C. W. Janssen: Erasmus University Rotterdam

Higher School of Economics Economic Journal Экономический журнал Высшей школы экономики, 2002, vol. 6, issue 4, 446-473

Abstract: We investigate the nature of the adverse selection problem in a market for a durable good where trading and entry of new buyers and sellers takes place in continuous time. We focus on the role of the interest rate and physical depreciation. We show that when the physical depreciation rate is relatively small, infinitely many equilibria exist where all goods are traded within finite time after their appearance in the market. In contrast, when the physical depreciation rate is relatively large the trade of new goods will stop in any equilibrium after a finite moment in time. At intermediate values, stationary equilibria, different from the static equilibria, may emerge. For any given level of the relative depreciation rate the interest rate only determines the speed of evolution along the equilibrium path.

Date: 2002
References: Add references at CitEc
Citations:

Downloads: (external link)
http://cyberleninka.ru/article/n/physical-deprecia ... th-adverse-selection

Related works:
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:scn:025886:16537833

Access Statistics for this article

More articles in Higher School of Economics Economic Journal Экономический журнал Высшей школы экономики from CyberLeninka, Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики»
Bibliographic data for series maintained by CyberLeninka ().