Price Transparency and Market Screening

Ayca Kaya () and Santanu Roy ()
Additional contact information
Ayca Kaya: University of Vienna
Santanu Roy: Southern Methodist University

No 2601, Departmental Working Papers from Southern Methodist University, Department of Economics

Abstract: In a lemons market with repeated trading by sellers with persistent private information, price transparency affects gains from trade and the market's ability to learn the seller's type. With price transparency, a class of complete-learning equilibria approaches the upper bound on gains from trade imposed by private information when the seller is patient. Without price transparency, prior work shows that complete learning is impossible and gains from trade cannot reach this bound. Price transparency changes incentives by inducing sellers to reject profitable but lower-than-expected offers to preserve future rents, allowing high quality to trade slowly without distorting low quality's trade.

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: 2026-09
New Economics Papers: this item is included in nep-com, nep-mic and nep-mst
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