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Transparency in Sequential Common-Value Trade

Author

Listed:
  • Justus Preusser
  • Andre Speit

Abstract

We consider the sale of a single indivisible common-value good in a dynamic market where short-lived buyers arrive over time. Buyers observe private signals about the value. The seller is initially uninformed and proposes the terms of trade. As time passes, all players learn about the value from delay in trade. Importantly, this learning process depends on what is made public about buyer-seller interactions. We compare the division of surplus across three transparency regimes that differ with respect to whether buyers observe the seller’s past actions or time-on-the-market. When the seller’s time-on-the market but not the seller’s past actions are observable, and if buyers’ signals are sufficiently rich, then there is no perfect Bayesian equilibrium where the seller extracts the full surplus. In the other two regimes, where buyers observe either everything or nothing about the seller’s past actions and time-on-the-market, the seller extracts the full surplus in at least one equilibrium, no matter the signal structure.

Suggested Citation

  • Justus Preusser & Andre Speit, 2023. "Transparency in Sequential Common-Value Trade," CRC TR 224 Discussion Paper Series crctr224_2023_487, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2023_487
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp487
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    References listed on IDEAS

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    1. Ayça Kaya & Kyungmin Kim, 2018. "Trading Dynamics with Private Buyer Signals in the Market for Lemons," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(4), pages 2318-2352.
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    More about this item

    Keywords

    Common-value; dynamic trade; transparency; learning; division of surplus;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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