Muthoo, Abhinay and Mutuswami, Suresh (2010) Imperfect competition and efficiency in lemons markets. Working Paper. Coventry: University of Warwick. Dept. of Economics. (Warwick economics research paper series (TWERPS), Vol.2010).

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Abstract

This paper studies the impact of competition on the degree of inefficiency in lemons markets. More precisely, we characterize the second-best mechanism (i.e., the optimal mechanism with private information) in a stylized lemons market with finite numbers of buyers and sellers. We then study the relationship between the degree of efficiency of the second-best mechanism and market competitiveness. The relationship between the first-best and second-best mechanisms is also explored.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Information asymmetry, Competition, Imperfect, Commerce
Series Name:	Warwick economics research paper series (TWERPS)
Publisher:	University of Warwick. Dept. of Economics
Place of Publication:	Coventry
Date:	2010
Volume:	Vol.2010
Number:	No.939
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/3515

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