Continuous Time Trading in Markets with Adverse Selection

Arbeitspapier

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. Typically, in equilibria of the continuous timemodel sellers withhigher quality wait in order to sell and wait more than sellers of lower qualitydo. Among other things, we show that for any distribution of quality there exist an infinite number of cyclical equilibria where all goods are traded within a finite time after entering the market.This holds true even if the good is not perfectly durable or when buyers are not risk-neutral.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 00-109/1

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design
• Subject: Dynamic Trading ; Asymmetric Information ; Entry ; Durable Goods ; Dauerhafte Konsumgüter ; Adverse Selektion ; Asymmetrische Information ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Janssen, Maarten C.W. ; Karamychev, Vladimir
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/85495
• Last update: 10.03.2025, 11:44 AM CET