at Google ScholarTitle data
Herweg, Fabian ; Müller, Daniel:
Overconfidence in the Market for Lemons.
In: The Scandinavian Journal of Economics.
Vol. 118
(2016)
Issue 2
.
- pp. 354-371.
ISSN 0347-0520
DOI: https://doi.org/10.1111/sjoe.12135
Abstract in another language
We extend Akerlof's "Market for Lemons" (1970, Quarterly Journal of Economics 84, 488–500) by assuming that some buyers are overconfident. Buyers in our model receive a noisy signal about the quality of the good that is on display for sale. Overconfident buyers do not update according to Bayes' rule but take the noisy signal at face value. We show that the presence of overconfident buyers can stabilize the market outcome by preventing total adverse selection. However, this stabilization comes at a cost: rational buyers are crowded out of the market.
Further data
| Item Type: | Article in a journal |
|---|---|
| Refereed: | Yes |
| Institutions of the University: | Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VIII: International Competition Policy > Chair Economics VIII: International Competition Policy - Univ.-Prof. Dr. Fabian Herweg Faculties Faculties > Faculty of Law, Business and Economics Faculties > Faculty of Law, Business and Economics > Department of Economics Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VIII: International Competition Policy |
| Result of work at the UBT: | No |
| DDC Subjects: | 300 Social sciences 300 Social sciences > 330 Economics |
| Date Deposited: | 01 Dec 2017 08:22 |
| Last Modified: | 20 Oct 2022 07:59 |
| URI: | https://eref.uni-bayreuth.de/id/eprint/40775 |