Costs and Benefits of Dynamic Trading in a Lemons Market

Speaker: William Fuchs, University of California Berkeley

Organized by: Department of Economics and Department of Decision Sciences

Abstract: We study a dynamic market with asymmetric information that creates the lemons problem. We compare e¢ ciency of the market under di§erent assumptions about the timing of trade. We identify positive and negative aspects of dynamic trading, describe the optimal market design under regularity conditions and show that continuous-time trading can be always improved upon.