Resale markets are necessary to correct misallocations of assets, but do they always ensure that goods end up in the hands of those who value them most? This article reviews theoretical arguments as to why this need not necessarily be so and when inefficiencies might be expected despite the presence of resale markets. Policy implications are also suggested.
Akerlof, G Allocative externalities Asymmetric information Auctions Bargaining Chicago School Coase Theorem Commitment Efficient allocation Incentive constraints Interdependent values Limited liability Market failure Market imperfections Mechanism design Participation constraints Private information Property rights allocation Resale markets Reservation utility Revelation principle Risk aversion Transferability
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Akerlof, G. 1970. The market for ‘lemons’: Quality uncertainty and the market mechanism. Quarterly Journal of Economics 84: 488–500.CrossRefGoogle Scholar