Price Transparency and Market Screening

Ayça Kaya and Santanu Roy

No 2008, Departmental Working Papers from Southern Methodist University, Department of Economics

Abstract: We consider repeated trading by sellers with persistent private information in dynamic lemons markets. We compare the outcomes of a transparent market where past trading prices are public to those of an opaque market, where they are private. We characterize the upper bound of trading surplus in an opaque market and construct a class of equilibria in a transparent market that improves upon this bound. We conclude that price transparency is beneficial in a repeated trading environment. The advantage of price transparency is indirect and operates through the strategic tools it provides the sellers of high quality to sustain high payoffs.

Keywords: Repeated sales; adverse selection; lemons market; price transparency. (search for similar items in EconPapers)
JEL-codes: C73 D61 D82 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-com, nep-gth, nep-mic and nep-reg
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