Market Transparency, Adverse Selection, and Moral Hazard

Tobias Klein, Christian Lambertz and Konrad O. Stahl

Journal of Political Economy, 2016, vol. 124, issue 6, 1677 - 1713

Abstract: We study how an improvement in market transparency affects seller exit and continuing sellers' behavior in a market setting that involves informational asymmetries. The improvement was achieved by reducing strategic bias in buyer ratings. It led to a significant increase in buyer satisfaction with seller performance, but not to an increase in seller exit. When sellers had the choice between exiting--a reduction in adverse selection--and staying but improving behavior--a reduction in moral hazard--they preferred the latter. Increasing market transparency led to better market outcomes.

Date: 2016
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Related works:
Working Paper: Market transparency, adverse selection, and moral hazard (2016)
Working Paper: Market Transparency, Adverse Selection, and Moral Hazard (2014)
Working Paper: Market Transparency, Adverse Selection, and Moral Hazard (2013)
Working Paper: Market Transparency, Adverse Selection, and Moral Hazard (2013)
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