Cycles and multiple equilibria in the market for durable lemons

Maarten C. W. Janssen; Vladimir Karamychev

We investigate the nature of market failure in a dynamic version of Akerlof (1970) where identical cohorts of a durable good enter the market over time. In the dynamic model, equilibria with qualitatively different properties emerge. Typically, in equilibria of the dynamic model, sellers with higher quality wait in order to sell and wait more than sellers of lower quality. Our main resultis that for any distribution of quality that there exist an infinite number of cyclical equilibria where all goods are traded within a certain number of periods after entering the market.

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Year of publication:	2000
Authors:	Janssen, Maarten C. W. ; Karamychev, Vladimir A.
Publisher:	Rotterdam [u.a.] : Tinbergen Inst.
Subject:	Dynamic Trading \| Asymmetric Information \| Entry \| Durable Goods \| Dauerhafte Konsumgüter \| Durable goods \| Asymmetrische Information \| Asymmetric information \| Produktqualität \| Product quality \| Gleichgewichtstheorie \| Equilibrium theory \| Markteintritt \| Market entry