Lemons and Peaches: A (Robust) Multi-stage Buying Mechanism with Multiple Applications

Hans Gersbach, Akaki Mamageishvili and Oriol Tejada

No 14063, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We introduce a four-stage, multi-price buying mechanism, which can be used by a (big) buyer to separate low-quality sellers - called "lemon" owners - from high-quality sellers - called "peach" owners. With a partition of sellers, the buyer obtains the commodities from the "peach" owners at a price that matches the willingness to sell. By contrast, "lemon" owners are trapped into selling their items at a low, or even negligible, price. Our mechanism is robust for several extensions of our baseline setup, offers applications for market makers and regulators, and may be used by interest groups in politics.

Keywords: Lemons; market; -; partition; -; signaling; -; commitment; -; market; maker; -; vote-buying; -; lobbying; -; decoy; ballots (search for similar items in EconPapers)
JEL-codes: C72 D4 D7 D72 D82 D86 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
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