Markets with Multidimensional Private Information

Veronica Guerrieri and Robert Shimer

American Economic Journal: Microeconomics, 2018, vol. 10, issue 2, 250-74

Abstract: This paper explores price formation when sellers are privately informed about their preferences and the quality of their asset. There are many equilibria, including a semi-separating one in which each seller's price depends on a one-dimensional index of her preferences and asset quality. This multiplicity does not rely on off-the-equilibrium path beliefs and so is not amenable to standard signaling game refinements. The semi-separating equilibrium may not be Pareto efficient, even if it is not Pareto dominated by any other equilibrium. Instead, efficient allocations may require transfers across uninformed buyers, inconsistent with any equilibrium.

JEL-codes: D11 D52 D82 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/mic.20160129
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Citations: View citations in EconPapers (14)

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Related works:
Working Paper: Markets with Multidimensional Private Information (2014)
Working Paper: Markets with Multidimensional Private Information (2013)
Working Paper: Markets with Multidimensional Private Information (2012)
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