Discussion Paper Details

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Title: Lemons and Peaches: A (Robust) Multi-stage Buying Mechanism with Multiple Applications

Author(s): Hans Gersbach, Akaki Mamageishvili and Oriol Tejada

Publication Date: October 2019

Keyword(s): Lemons market - Partition - Signaling - Commitment - Market maker - Vote-buying - Lobbying - Decoy ballots

Programme Area(s): Industrial Organization

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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Bibliographic Reference

Gersbach, H, Mamageishvili, A and Tejada, O. 2019. 'Lemons and Peaches: A (Robust) Multi-stage Buying Mechanism with Multiple Applications'. London, Centre for Economic Policy Research.