Müller, Holger M.; Inderst, Roman - In: Economic Theory 19 (2002) 3, pp. 599-622
This paper considers a dynamic version of Akerlof's (1970) lemons problem where buyers and sellers must engage in search to find a trading partner. We show that if goods are durable, the market itself may provide a natural sorting mechanism. In equilibrium, high-quality goods sell at a higher...