Information Uncertainty

Maarten Janssen and Santanu Roy

No 18391, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In a market where buyers and sellers are uncertain about whether others are informed about the quality of an asset, inefficiency in trading arises due to incomplete learning. An uninformed seller will want to learn the asset's quality from the buyers' bids and may be willing to sell at low, but not at intermediate bids. Buyers may have incentives to pool their bids to prevent this type of learning. We outline conditions under which potential gains from trade cannot be realized in states where all traders are symmetrically informed or symmetrically uninformed.

JEL-codes: D82 L13 L15 (search for similar items in EconPapers)
Date: 2023-08
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