Open AccessTransparency and distressed sales under asymmetric information
Author(s) -
Fuchs William,
Öry Aniko,
Skrzypacz Andrzej
Publication year - 2016
Publication title -
theoretical economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.404
H-Index - 32
eISSN - 1555-7561
pISSN - 1933-6837
DOI - 10.3982/te2237
Subject(s) - transparency (behavior) , private information retrieval , microeconomics , interdependence , market liquidity , economics , shock (circulatory) , dominance (genetics) , public information , business , monetary economics , chemistry , mathematics , public administration , political science , medicine , law , gene , biochemistry , statistics
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.