- The Market for Lemons with Seller Partition
We introduce a four-stage, multi-prize buying mechanism, which can be used by a (big) buyer to separate low-quality sellers, called ＂lemon＂ owners, from high-quality sellers. When the pool of sellers can be partitioned into groups with known mixes of high- and low-quality sellers, the buyer obtains the commodities from the high-quality sellers 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. These properties hold even if the buyer cannot commit to a single execution of the mechanism. We outline some applications of our results and suggest that our mechanism might be useful for market makers.