Contracting Environments and Efficiency in Markets with Hidden Information: An Experiment

Wanda Mimra and Christian Waibel

American Economic Journal: Microeconomics, 2025, vol. 17, issue 3, 35-74

Abstract: This paper provides the first systematic analysis of the role of contracting environments on market outcomes and efficiency in markets with hidden information using experimental methods. When markets are plagued by hidden information, competition does not necessarily ensure efficient market outcomes. This crucially depends on the nature of the hidden information. We present a parsimonious experimental design that serves to compare the different contracting environments for both types of hidden information markets, private and common values. The degree of equilibrium play that we find is strikingly high, particularly in the complex cases of competitive common values markets.

JEL-codes: D82 D86 L15 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/mic.20170293

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