Dynamic markets for lemons: performance, liquidity, and policy intervention

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dc.contributor.author Moreno, Diego
dc.contributor.author Wooders, John
dc.date.accessioned 2017-09-14T12:31:09Z
dc.date.available 2017-09-14T12:31:09Z
dc.date.issued 2016-05-01
dc.identifier.bibliographicCitation Moreno, D., Wooders, J (2016), Dynamic markets for lemons: Performance, liquidity, and policy intervention,, Theoretical Economics, v. 11, n. 2, pp. 601-639.
dc.identifier.issn 1933-6837
dc.identifier.uri http://hdl.handle.net/10016/25254
dc.description.abstract We study nonstationary dynamic decentralized markets with adverse selection in which trade is bilateral and prices are determined by bargaining. Examples include labor markets, housing markets, and markets for financial assets. We characterize equilibrium, and identify the dynamics of transaction prices, trading patterns, and the average quality in the market. When the horizon is finite, the surplus in the unique equilibrium exceeds the competitive surplus; as traders become perfectly patient, the market becomes completely illiquid at all but the first and last dates, but the surplus remains above the competitive surplus. When the horizon is infinite, the surplus realized equals the static competitive surplus. We study policies aimed at improving market performance, and show that subsidies to low quality or to trades at a low price, taxes on high quality, restrictions on trading opportunities, or government purchases may raise the surplus. In contrast, interventions like the Public-Private Investment Program for Legacy Assets reduce the surplus when traders are patient.
dc.description.sponsorship We gratefully ac-knowledge financial support from the Spanish Ministry of Science and Innovation, Grant ECO2011-29762.Wooders is grateful for financial support from the Australian Research Council’s Discovery Projects fundingscheme (project number DP140103566).
dc.format.mimetype application/pdf
dc.language.iso eng
dc.publisher Econometric Society
dc.relation.isversionof http://hdl.handle.net/10016/15507
dc.rights © Econometric Society
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other Adverse selection
dc.subject.other Decentralized trade
dc.subject.other Liquidity
dc.subject.other Ppip
dc.subject.other Information
dc.subject.other Equilibrium
dc.subject.other Search
dc.subject.other Trade
dc.title Dynamic markets for lemons: performance, liquidity, and policy intervention
dc.type article
dc.subject.jel C73
dc.subject.jel C78
dc.subject.jel D82
dc.subject.eciencia Economía
dc.identifier.doi 10.3982/TE1631
dc.rights.accessRights openAccess
dc.relation.projectID Gobierno de España. ECO2011-29762
dc.type.version publishedVersion
dc.identifier.publicationfirstpage 601
dc.identifier.publicationissue 2
dc.identifier.publicationlastpage 639
dc.identifier.publicationtitle Theoretical economics
dc.identifier.publicationvolume 11
dc.identifier.uxxi AR/0000018081
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