Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98540
Authors: 
Voorneveld, Mark
Weibull, Jörgen W.
Year of Publication: 
2011
Citation: 
[Journal:] Games [ISSN:] 2073-4336 [Publisher:] MDPI [Place:] Basel [Volume:] 2 [Year:] 2011 [Issue:] 1 [Pages:] 163-186
Abstract: 
We consider a market for lemons in which the seller is a monopolistic price setter and the buyer receives a private noisy signal of the product's quality. We model this as a game and analyze perfect Bayesian equilibrium prices, trading probabilities and gains of trade. In particular, we vary the buyer's signal precision, from being completely uninformative, as in standard models of lemons markets, to being perfectly informative. We show that high quality units are sold with positive probability even in the limit of uninformative signals, and we identify some discontinuities in the equilibrium predictions at the boundaries of completely uninformative and completely informative signals, respectively.
Subjects: 
lemons
adverse selection
noisy quality signals
two-sided incomplete information
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Article
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