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Dynamic sorting in durable goods markets with buyer heterogeneity

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  • Santanu Roy

Abstract

In a competitive dynamic durable good market where sellers have private information about quality, I identify certain inefficiencies that arise due to heterogeneity in buyers' valuations . Even if the market induces dynamic sorting among sellers and all goods are eventually traded, inefficiency can arise because high valuation buyers buy early when lowquality goods are sold, while highquality goods are allocated to low valuation buyers that buy later. This misallocation adds to the inefficiency caused by delay in trading. Under certain circumstances, highquality goods may never be traded as in a static market.

Suggested Citation

  • Santanu Roy, 2014. "Dynamic sorting in durable goods markets with buyer heterogeneity," Canadian Journal of Economics, Canadian Economics Association, vol. 47(3), pages 1010-1031, August.
    • Handle: RePEc:cje:issued:v:47:y:2014:i:3:p:1010-1031
    DOI: 10.1111/caje.12099
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    References listed on IDEAS

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    Cited by:

    1. William Fuchs & Andrzej Skrzypacz, 2019. "Costs and benefits of dynamic trading in a lemons market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 33, pages 105-127, July.
    2. Cong Pan, 2018. "Firms’ timing of production with heterogeneous consumers," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(4), pages 1339-1362, November.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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