Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300361 
Authors: 
Year of Publication: 
2023
Series/Report no.: 
IFS Working Papers No. 23/40
Publisher: 
Institute for Fiscal Studies (IFS), London
Abstract: 
I provide an equilibrium analysis of 'selection markets': where consumers not only vary in how much they are willing to pay, but also in how much they cost to the seller. The model provides a joint explanation for three empirical phenomena: low uptake of existing products, slow demand for new products, and market inactivity despite unmet demand. I characterize when early adopters are more adversely selected in new markets. This lowers demand, increases costs, and leads markets to unravel prematurely. With endogenous market entry for new products (e.g., reverse mortgages, annuities), extended patents serve as de facto time-varying subsidies.
Subjects: 
Adverse selection
consumer behavior
innovation acceptance
willingness to pay analysis
market entry
equilibrium model
insurance market
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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