Adverse selection in dynamic matching markets
- Author(s)
- Klaus Kultti, E. Mauring, Juuso Vanhala, Timo Vesala
- Abstract
We study the Akerlofian adverse selection problem in a dynamic matching model where the competitive situation varies across different meetings. The 'lemons principle' is shown to limit the high quality sales within a wider range of quality distributions than in the Walrasian benchmark. High quality goods can nevertheless be traded, albeit less frequently than the low quality goods. For certain quality distributions, there exists a 'partially pooling' steady state where high quality sellers are active whenever at least two buyers compete for the good. Otherwise, the model features cycles in a sense that high quality goods are traded only in non-consecutive periods.
- Organisation(s)
- External organisation(s)
- University of Helsinki, Bank of Finland, University College London, LähiTapiola Varainhoito Oy
- Journal
- Bulletin of Economic Research
- Volume
- 67
- Pages
- 115-133
- No. of pages
- 19
- ISSN
- 0307-3378
- DOI
- https://doi.org/10.1111/j.1467-8586.2012.00464.x
- Publication date
- 04-2015
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502021 Microeconomics
- Keywords
- ASJC Scopus subject areas
- Economics and Econometrics
- Portal url
- https://ucris.univie.ac.at/portal/en/publications/adverse-selection-in-dynamic-matching-markets(93a94dbb-c9fe-4f12-a805-bf11680e1a7f).html