Lemons and Peaches: A (Robust) Multi-stage Buying Mechanism with Multiple Applications
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Date
2019-10
Publication Type
Working Paper
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yes
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Abstract
We introduce a four-stage, multi-price buying mechanism, which can be used by a (big) buyer to separate low-quality sellers - called "lemon" owners - from high-quality sellers - called "peach" owners. With a partition of sellers, the buyer obtains the commodities from the "peach" owners at a price that matches the willingness to sell. By contrast, "lemon" owners are trapped into selling their items at a low, or even negligible, price. Our mechanism is robust for several extensions of our baseline setup, offers applications for market makers and regulators, and may be used by interest groups in politics.
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published
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Publisher
Centre for Economic Policy Research
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Subject
Lemons market; Partition; Signaling; Commitment; Decoy ballots
Organisational unit
03729 - Gersbach, Hans / Gersbach, Hans