We investigate the nature of the adverse selection problem in a market for adurable goodwhere trading and entry of new buyers and sellers takes place in continuoustime. In thecontinuous time model equilibria with properties that are qualitativelydifferent from thestatic equilibria, emerge....

This paper examines the conditions for credit volume or borrower rationing in a competitive credit market in which the project characteristics are private information of the borrowers. There can only be credit volume rationing if the higher-risk credit applicants have a higher return in the...

This paper investigates the design of incentives in a dynamic adverse selection framework when agents' production technologies display learning effects and agents' rate of learning is private knowledge. In a simple two-period model with full commitment available to the principal, we show that...

We take a dynamic perspective on insurance markets under adverseselection and study a generalized Rothschildand Stiglitz model where agents may differ with respect to theaccidental probability and their expenditure levels incase an accident occurs. We investigate the nature of dynamicinsurance...

Charness and Dufwenberg (American Economic Review, June 2011, 1211-1237) have recently demonstrated that cheap-talk communication raises efficiency in bilateral contracting situations with adverse selection. We replicate their finding and check its robustness by introducing competition between...

This paper addresses the question of delegation in a partial contracting set-up, where only the control over actions is contractible. We consider an organization that should take two decisions, affected by a common state of the world parameter only known by the agent. We show that, if the...

This paper studies markets plagued with asymmetric information on the quality of traded goods. In Akerlof's setting, sellers are better informed than buyers. In contrast, we examine cases where buyers are better informed than sellers. This creates an inverse adverse selection problem: The market...

We investigate the nature of market failure in a dynamic version ofAkerlof (1970) where identicalcohorts of a durable good enter the market over time. In the dynamicmodel, equilibria withqualitatively different properties emerge. Typically, in equilibriaof the dynamic model, sellerswith higher...

The seller of N distinct objects is uncertain about the buyer's valuation for those objects. The seller's problem, to maximize expected revenue, consists of maximizing a linear functional over a convex set of mechanisms. A solution to the seller's problem can always be found in an extreme point...

Rothschild and Stiglitz (1976) show that there need not exist a competitive equilibrium in markets with adverse selection. Building on their framework we demonstrate that externalities between agents - an agent's utility upon accepting a contract depends on the average type attracted by the...