We study the Akerlofian adverse selection problem in a dynamic matching model where the competitive situation varies across different meetings. The 'lemons principle' is shown to limit the high quality sales within a wider range of quality distributions than in the Walrasian benchmark. High quality goods can nevertheless be traded, albeit less frequently than the low quality goods. For certain ...

The price dispersion means different prices for same goods. In the Internet economy, many economists reckon that the price dispersion in the e-commerce markets should descend along with the dropping of search cost. However, the correlative empirical studies reach a contrary opinion: there not only exist price dispersion in the e-commerce market, but also has larger dispersion degree than the tr...

This paper analyzes a canonical principal-agent problem with moral hazard and adverse selection. The agent is risk averse and has private information about his disutility of taking an unobservable action. The principal is risk neutral and designs a menu of contracts consisting of a compensation scheme and a recommended action for each type of agent to maximize expected profit. We first derive a...

We thank the ERIU for grant support. In addition, we thank participants at two ERIU conferences and at the November 2003 NBER health care program meeting for their comments. All errors remain the authors'.

We study a principal-agent model with moral hazard and adverse selection. Agents have private information about the distribution of outcomes conditional on each effort. We characterize the solution of the resulting multidimensional screening problem, and establish several general properties. A positive mass of types with low conditional probabilities of success gets a constant payment and zero ...

We show how trade credit use depends on the value of collateral in a repossession, as well as the extent to which firms face adverse selection problems when dealing with an outside investor. The theory explains: why trade credit is short term credit, why firms simultaneously take and extend credit to other firms with similar levels of creditworthiness, why firms whose prospects start to deterio...

A model of adverse selection when teams form endogenously highlights the relationship between discrimination and occupational choice. It shows discrimination can persist even when management allocates credit fairly, if worker beliefs about discrimination in‡uence their decision to engage in teamwork. Furthermore, among those choosing to work as entrepreneurs or in other individualistic occupati...

I reconcile a disagreement in the literature regarding the impact of downstream price competition on anticompetitive exclusive dealing, and then extend the exclusive dealing literature to accommodate adverse selection. Adverse selection expands the scope of inefficient exclusion, and may also explain policies of partial exclusion, in which an incumbent profits by locking up select retailers eve...

Many economists believe that credit market distortions create a financial accelerator which destabilizes the economy. This paper shows that when credit market distortions arise from adverse selection they sometimes stabilize the economy rather than destabilize it. The stabilizing forces are closely related to forces that cause overinvestment in static models. When investment projects are equity...

Leasing contracts are extensively used in durable goods markets. These contracts specify a rental rate and an option price at which the used good can be bought upon termination of the lease. This option price cannot be controlled when the car is sold. We show that in a world where quality is observable this additional control variable is ineffective. Under adverse selection instead, leasing con...