Waiting for News in the Market for Lemons, Supplemental material: Discrete-Time Appendix

The purpose of this supplement is to establish the strong connection between the continuous-time model of Daley and Green (2011) and a discrete-time analog. First, when time periods are short, there exists an equilibrium with nearly identical structure to Ξ(α, β) (the equilibrium of interest in Daley and Green (2011)). Second, this equilibrium is unique among stationary equilibria satisfying a similar refinement on off-path beliefs and non-decreasing value functions (a condition we include merely for convenience). Third, as we take the period length to zero, the sequence of discrete-time equilibria converges to Ξ(α, β).