Template-Type: ReDIF-Paper 1.0
Title: Revisiting the Lemons Market
Author-Name: Anke S. Kessler
Classification-JEL: D82, L15
Keywords: Market Performance, Information Structure, Adverse Selection
Abstract: This paper extends the standard competitive adverse selection
 model by allowing for qualitatively different information structures
 of agents on the informed side of the market. Using the stylized
 framework of the market for used cars, we examine the welfare
 properties of equilibria under the assumption that a fraction of the
 sellers remains uninformed about a parameter which is relevant for
 his own transaction. The analysis suggests that market performance is
 in general nonmonotonic in the number of uninformed sellers. The
 extent to which the presence of less well informed sellers improves
 upon a situation where all sellers are perfectly informed is shown to
 depend crucially on (a) the potential gains from trade in the market
 and (b) the average quality of the sellers' information structure.
Series: Sonderforschungsbereich 303, University of Bonn, Germany
Length: 19 pages
Creation-Date: 1996-09
Handle: RePEc:bon:bonsfa:517