In this paper we examine the problem of dynamic adverse selection in a stylized market where the quality of goods is a seller’s private information while the realized distribution of qualities is public information. We show that in equilibrium all goods can be traded if the size of the supply is publicly available to market participants. Moreover, we show that if exchanges can take place frequently enough, then agents roughly enjoy the entire potential surplus from exchanges. We illustrate these findings with a dynamic model of trade where buyers and sellers repeatedly interact over time. We also identify circumstances under which only full trade equilibria exist. Further, we give conditions for full trade to obtain when the realized distribution of qualities is not public information and when new goods enter the market at later stages.

Bilancini, E. e L., Boncinelli. "Dynamic Adverse Selection and the Supply Size" Working paper, DEMB WORKING PAPER SERIES, Dipartimento di Economia Politica - Università di Modena e Reggio Emilia, 2014. https://doi.org/10.25431/11380_1190615

Dynamic Adverse Selection and the Supply Size

Bilancini, E.;
2014

Abstract

In this paper we examine the problem of dynamic adverse selection in a stylized market where the quality of goods is a seller’s private information while the realized distribution of qualities is public information. We show that in equilibrium all goods can be traded if the size of the supply is publicly available to market participants. Moreover, we show that if exchanges can take place frequently enough, then agents roughly enjoy the entire potential surplus from exchanges. We illustrate these findings with a dynamic model of trade where buyers and sellers repeatedly interact over time. We also identify circumstances under which only full trade equilibria exist. Further, we give conditions for full trade to obtain when the realized distribution of qualities is not public information and when new goods enter the market at later stages.
Maggio
Bilancini, E.; Boncinelli, L.
Bilancini, E. e L., Boncinelli. "Dynamic Adverse Selection and the Supply Size" Working paper, DEMB WORKING PAPER SERIES, Dipartimento di Economia Politica - Università di Modena e Reggio Emilia, 2014. https://doi.org/10.25431/11380_1190615
File in questo prodotto:
File Dimensione Formato  
0034.pdf

accesso aperto

Tipologia: Versione dell'editore (versione pubblicata)
Dimensione 698.76 kB
Formato Adobe PDF
698.76 kB Adobe PDF Visualizza/Apri
Pubblicazioni consigliate

Caricamento pubblicazioni consigliate

Licenza Creative Commons
I metadati presenti in IRIS UNIMORE sono rilasciati con licenza Creative Commons CC0 1.0 Universal, mentre i file delle pubblicazioni sono rilasciati con licenza Attribuzione 4.0 Internazionale (CC BY 4.0), salvo diversa indicazione.
In caso di violazione di copyright, contattare Supporto Iris

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11380/1190615
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact