EconPapers    
Economics at your fingertips  
 

Imperfect information transmission and adverse selection in asset markets

Michael Choi

Journal of Economic Theory, 2018, vol. 176, issue C, 619-649

Abstract: This paper studies asset markets where owners of assets do not inherit private information from previous owners after a transaction and must learn about asset quality over time. Instantaneous learning by owners maximizes the number of owners with private information, but also maximizes the trading volume and welfare. This result is contrary to the traditional view that information asymmetry hurts trade efficiency. Public disclosure of information is not always optimal and its welfare implication depends crucially on the source of gains from trade.

Keywords: Adverse selection; Information transmission; Learning (search for similar items in EconPapers)
JEL-codes: C73 C78 D82 D83 L15 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022053118301030
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:176:y:2018:i:c:p:619-649

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-05-11
Handle: RePEc:eee:jetheo:v:176:y:2018:i:c:p:619-649