When frictions favour information revelation

Tanguy Isaac ()
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Tanguy Isaac: Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium

No 2010019, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We study information revelation in markets with pairwise meetings. First, we reconsider the one-sided case within constant entry flow model. The same question has been studied in an identical framework in Serrano and Yosha (1993). We prove that there exists an additional equilibrium not detected by Serrano and Yosha (1993). We show that this equilibrium is characterized by incomplete information revelation. Until now, no equilibrium with incomplete revelation of information was known in this model. Our second main result is that, at this new equilibrium, information revelation is worse when frictions are weaker. One prove also that increasing the frictions is a Pareto improvement. Finally, we show that those properties should also characterize some equilibria of the two-sided case studied by Wolinsky (1990).

Date: 2010-05-01
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