Since Akerlof’s theory of a market for lemons, economists have viewed quality uncertainty as an informational advantage for sellers. Drawing on frontier techniques, we propose in this paper a simple method to measure inefficiency of both sellers and buyers in markets for goods with different levels of quality. We apply our non-parametric double-frontier framework to the case of illicit substanc...

Recent theoretical research indicates that search deterrence strategies are generally optimal for sellers in consumer goods markets. Yet search deterrence is not always employed in such markets. To understand this incongruity, we develop an experimental market where profit-maximizing strategy dictates sellers should exercise one form of search deterrence, exploding offers. We find buyers are th...

We propose efficient intermodal transportation auctions for the B2B e-commerce logistics problem (ELP). This paper is among the first to consider transaction costs into auctions. In the ELP, the shipper is a B2B e-commerce platform by which a number of online orders between goods sellers and buyers are generated, and 3PLs (third-party logistics providers) can fulfill these online orders. The sh...

We investigate the nature of the adverse selection problem in a market for a durable good where trading and entry of new buyers and sellers takes place in continuous time. In the continuous time model equilibria with properties that are qualitatively different from the static equilibria, emerge. Typically, in equilibria of the continuous time model sellers with higher quality wait in order to s...

We study a Bertrand game where two sellers supplying products of different and unverifiable qualities can outwit potential clients through their (costly) deceptive advertising. We characterize a class of pooling equilibria where sellers post the same price regardless of their quality and low quality ones deceive buyers. Although in these equilibria low quality goods are purchased with positive ...

We present an exchange system for trading complex nonstandard goods, such as used cars. We explain the representation of desirable purchases and sales, describe data structures for fast identification of matches between buyers and sellers, and give experiments on the system’s performance.

We compare the behavior of car mechanics and college students as sellers in experimental credence goods markets. Finding largely similar behavior, we note much more overtreatment by car mechanics, probably due to decision heuristics they learned in their professional training. JEL classifications: C91, D82, C72

This paper explores a reason why retailers pay such large merchant fees to credit card issuers. Credit cards as media of exchange are introduced to a New Monetarist model in which exchange occurs in alternating centralized and decentralized markets. Sellers who exert high (low) effort produce a good with a high (low) probability of being high quality. The quality of the good is revealed only af...

Markets (electronic or otherwise) have three main functions, summarized in Table 1: matching buyers and sellers; facilitating the exchange of information, goods, services and payments associated with market transactions; and providing an institutional infrastructure, such as a legal and regulatory framework, that enables the efficient functioning of the market. In a modern economy, the first tw...