Market Selection and Asymmetric Information
AbstractDo investors making complementary investments face the correct incentives, especially when they cannot contract with each other prior to their decisions? We present a two-sided matching model in which buyers and sellers make investments prior to matching. Once matched, buyer and seller bargain over the price, taking into account outside options. Efficient decisions can always be sustained in equilibrium. We characterize the inefficiencies that can arise in equilibrium, and show that equilibria will be constrained efficient. We also show that the degree of diversity in a large market has implications for the extent of any inefficiency.
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Bibliographic InfoPaper provided by Penn Economics Department in its series Penn CARESS Working Papers with number d50f0ddbbf9f79b6e05bb90a5d0d23c1.
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- George J. Mailath & Alvaro Sandroni, 2003. "Market Selection and Asymmetric Information," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 343-368.
- George J. Mailath & Alvaro Sandroni, 2003. "Market Selection and Asymmetric Information," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 343-368, 04.
- George J. Mailath & Alvaro Sandroni, 2000. "Market Selection and Asymmetric Information," CARESS Working Papres mkt-selection, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- George J. Mailath & Alvaro Sandroni, . "Market Selection and Asymmetrick Information," CARESS Working Papres 00-07, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
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