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Title: Imperfect Competition and Efficiency in Lemons Markets
Authors: Muthoo, Abhinay
Mutuswami, Suresh
First Published: May-2011
Publisher: Blackwell
Citation: Economic Journal, 2011, 121 (552), pp. 580-594.
Abstract: This article studies the impact of competition on the degree of inefficiency in lemons markets. More precisely, we characterise the second-best mechanism (i.e. the optimal mechanism with private information) in a stylised 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. A general message of our results is that increasing competition may not help lemons markets in some circumstances. Moreover, increasing competition beyond a certain degree increases the distance between the first-best and second-best levels of efficiency.
ISSN: 0013-0133 (Print)
1468-0297 (Online)
Type: Article
Description: Full text currently not available on the LRA. The published version is available from the publisher's website at: ; DOI: 10.1111/j.1468-0297.2011.02425.x
Appears in Collections:Published Articles, Dept. of Economics

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