Cycles and multiple equilibria in the market for durable lemons

Maarten Janssen and Vladimir Karamychev

Economic Theory, 2002, vol. 20, issue 3, 579-601

Abstract: The paper investigates the nature of market failure in a dynamic version of Akerlof (1970) where identical cohorts of a durable good enter the market over time. In the dynamic model, equilibria with qualitatively different properties emerge. Typically, in equilibria of the dynamic model, sellers with higher quality wait in order to sell and wait more than sellers of lower quality. The main result is that for any distribution of quality there exist an infinite number of cyclical equilibria where all goods are traded within a certain number of periods after entering the market.

Keywords: Dynamic trading; Asymmetric information; Entry; Durable goods. (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Date: 2002-03-21
Note: Received: December 21, 2000; revised version: September 5, 2001
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Citations: View citations in EconPapers (14)

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Related works:
Working Paper: Cycles and Multiple Equilibria in the Market for Durable Lemons (2000)
Working Paper: Cycles and Multiple Equilibria in the Market for Durable Lemons (2000)
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