Competitive search markets for durable goods

Holger M. Müller () and Roman Inderst
Additional contact information
Holger M. Müller: Department of Economics, University of Mannheim, A5, 68131 Mannheim, GERMANY

Economic Theory, 2002, vol. 19, issue 3, 599-622

Abstract: This paper considers a dynamic version of Akerlof's (1970) lemons problem where buyers and sellers must engage in search to find a trading partner. We show that if goods are durable, the market itself may provide a natural sorting mechanism. In equilibrium, high-quality goods sell at a higher price than low-quality goods but also circulate longer. This accords with the common wisdom that sellers who want to sell fast may have to accept a lower price. We then compare the equilibrium outcomes under private information with those under complete information. Surprisingly, we find that for a large range of parameter values the quilibrium outcomes under the two information regimes coincide, despite the fact that circulation time is used to achieve separation.

Keywords: Lemons problem; Durable goods; Search markets. (search for similar items in EconPapers)
JEL-codes: D82 D83 L15 (search for similar items in EconPapers)
Date: 2001-12-20
Note: Received: August 24, 2000; revised version: October 24, 2000
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.de/link/service/journals/00199/papers/2019003/20190599.pdf (application/pdf)
Access to the full text of the articles in this series is restricted

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:spr:joecth:v:19:y:2002:i:3:p:599-622

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().