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| Author: | Muthoo, A. Mutuswami, S. |
| Title: | Imperfect competition and efficiency in lemons markets |
| Journal: | Economic Journal
2011 : MAY, VOL 121:552 p. 580-594 |
| Index terms: | market efficiency buying selling competitiveness fruit industry |
| Language: | eng |
| Abstract: | This paper examines the impact of competition on the degree of inefficiency in lemon markets. More precisely the second-best mechanism (i.e. the optimal mechanism with private information) in a stylized lemons market with finite numbers of buyers and sellers is characterized. The study of this paper investigates the relation between the degree of efficiency of the second-best mechanism and market competitiveness. The results suggest that increasing competition might not help lemons markets in some circumstances. Moreover, increasing competition beyond a certain degree increases the distance between the first-best and second-best levels of efficiency. |
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