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Too much trade: the hidden problem of adverse selection

De Meza, David ORCID: 0000-0002-5638-8310, Reito, Francesco and Reyniers, Diane J. ORCID: 0000-0003-0677-2020 (2021) Too much trade: the hidden problem of adverse selection. Journal of Public Economics, 204. ISSN 0047-2727

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Identification Number: 10.1016/j.jpubeco.2021.104551


Adverse selection famously leads to the crowding out of socially beneficial trades. We show that even more trades may be simultaneously crowded in. The reason is that, in the absence of complete unravelling, “lemons” fetch more under adverse selection. It is demonstrated how these “bad” trades occur in insurance, credit and used-car markets, and some policy implications are discussed.

Item Type: Article
Official URL:
Additional Information: © 2021 Elsevier BV
Divisions: Management
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HB Economic Theory
H Social Sciences > HA Statistics
JEL classification: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C13 - Estimation
D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Personal Finance
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information
Date Deposited: 08 Nov 2021 11:24
Last Modified: 14 Jun 2024 05:30

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