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| Author: | Hendel, I. Lizzeri, A. |
| Title: | Adverse selection in durable goods markets |
| Journal: | American Economic Review
1999 : DEC, VOL. 89:5, p. 1097-1115 |
| Index terms: | ECONOMICS CONSUMER DURABLES MARKETS |
| Language: | eng |
| Abstract: | The authors present a dynamic model of adverse selection to examine the interactions between new and used goods markets. They find that the used market never shuts down, the volume of trade can be large, and distortions are lower than previously thought. New cars prices can be higher under adverse selection than in its absence. An extension to several brands that differ in reliability leads to testable predictions of the effects of adverse selection. Unreliable brands have steeper price declines and lower volumes of trade. |
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