Dynamic sorting in durable goods markets with buyer heterogeneity
نویسنده
چکیده
In a competitive dynamic durable good market where sellers have private information about quality, I identify certain ineffi ciencies that arise due to heterogeneity in buyers’ valuations. Even if the market induces dynamic sorting among sellers and all goods are eventually traded, ineffi ciency can arise because high valuation buyers buy early when low quality goods are sold, while high quality goods are allocated to low valuation buyers that buy later. This misallocation adds to the ineffi ciency caused by delay in trading. Under certain circumstances, high quality goods may never be traded as in a static market. JEL Classification: D82, L15. ∗I thank Alessandro Lizzeri and Maarten Janssen for their comments on an earlier version of this paper. The current version has gained from the comments made by an anonymous referee. †Department of Economics, Southern Methodist University, Dallas, TX 75275-0496, USA. Tel: (+1) 214 768 2714. E-mail: [email protected].
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