Market Transparency, Adverse Selection, and Moral Hazard

Tobias Klein, Christian Lambertz and Konrad O. Stahl

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: We study the effects of improvements in market transparency on eBay on seller exit and continuing sellers’ behavior. An improvement in market transparency by reducing strategic bias in buyer ratings led to a significant increase in buyer valuation especially of sellers rated poorly prior to the change, but not to an increase in seller exit. When sellers had the choice between exiting—a reduction in adverse selection—and improved behavior—a reduction in moral hazard—, they preferred the latter because of lower cost. Increasing market transparency improves on market outcomes.

Keywords: Anonymous markets; adverse selection; moral hazard; reputation building mechanisms; market transparency; market design. (search for similar items in EconPapers)
JEL-codes: D47 D83 L15 (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-com and nep-cta
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Citations: View citations in EconPapers (13)

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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)
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Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:426

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