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Transparency and distressed sales under asymmetric information

William Fuchs, Aniko Öry and Andrzej Skrzypacz

Theoretical Economics, 2016, vol. 11, issue 3

Abstract: We analyze price transparency in a dynamic market with private information and interdependent values. Uninformed buyers compete inter- and intra-temporarily for a good sold by an informed seller suffering a liquidity shock. We contrast public versus private price offers. With two opportunities to trade, all equilibria with private offers have more trade than any equilibrium with public offers; under some additional conditions, we show Pareto-dominance of the private-offers equilibria. If a failure to trade by the deadline results in an efficiency loss, public offers can induce a market breakdown before the deadline, while trade never stops with private offers.

Keywords: Adverse selection; transparency; distress; market design; volume (search for similar items in EconPapers)
JEL-codes: D82 G14 G18 (search for similar items in EconPapers)
Date: 2016-09-13
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Working Paper: Transparency and Distressed Sales under Asymmetric Information (2015) Downloads
Working Paper: Transparency and Distressed Sales under Asymmetric Information (2015) Downloads
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