Assortative Matching, Adverse Selection and Durable Goods: Transaction History, Safety Regulation and the Likelihood of Trade in the Business Aircraft Market

Abstract

In recent years, considerable progress has occurred in modeling durable goods transactions in dynamic settings under asymmetric information. Most notable among these contributions are the works of Hendel and Lizzeri (1999, 2002), Janssen and Roy (2002), and Hendel, Lizzeri and Siniscalchi (2005). I explore registration changes for a sample of business aircraft over the period 1980-1999 to test some of the predictions of these models. The empirical regularities highlighted in this paper support these models. My results are also consistent with the view that high levels of efficiency can obtain even when information asymmetries condition the durable good trading environment.