Transparency and distressed sales under asymmetric information

by William Fuchs, Aniko Öry, and Andrzej Skrzypacz

We analyze price transparency in a dynamic market with private information and correlated 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. In a two-period case 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

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Year of publication:	February 2015 ; Draft: February 6, 2015
Authors:	Fuchs, William ; Öry, Aniko ; Skrzypacz, Andrzej
Publisher:	[Stanford, CA] : [Stanford Graduate School of Business]
Subject:	Adverse selection \| Transparency \| Distress \| Market design \| Volume \| Asymmetrische Information \| Asymmetric information \| Adverse Selektion \| Theorie \| Theory