Discussion paper
DP14063 Lemons and Peaches: A (Robust) Multi-stage Buying Mechanism with Multiple Applications
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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