Old Coins Sold on eBay

People frequently sell bags of old coins dating back to the Roman Empire on eBay. Many of the sellers dug up the coins themselves. The eBay description will often state that the coins have not been examined and are still dirty. Sellers don’t normally highlight the dirt on their wares. Adverse selection, however, could rationally cause you to place a higher value on dirty, unexamined coins.

Coins from the Roman Empire have vastly different values depending upon many factors, including whether they are composed of bronze or gold. If the seller had carefully examined the coins, he would have removed any gold ones before the auction. If the seller has information about the different coins’ values, adverse selection would cause him to sell only the coins that he values the least. When the coins are unexamined, however, the seller has no more information about them than the buyer does, and consequently adverse selection doesn’t come into play, and the buyer has a chance at getting gold.