Uninformed buyers and market efficiency

Carl G. Maier and Michal Marenčák

VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking from Verein für Socialpolitik / German Economic Association

Abstract: Empirical evidence shows that low cost of signaling interest in offers can result in a significant number of inappropriate signals. This paper provides a theoretical explanation for this observation as an equilibrium outcome of a model with utility maximizing fully rational agents that decide to signal their interest without knowing whether the offer suits them or not. We show that falling transaction costs can decrease market efficiency and social welfare.

JEL-codes: C72 D47 D83 E24 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-gth, nep-hpe, nep-mac, nep-mic and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc17:168207

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