Market Transparency, Adverse Selection, and Moral Hazard
AbstractWe study the effects of improvements in market transparency on eBay on seller exit and continuing sellersâ€™ 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 exitingâ€”a reduction in adverse selectionâ€”and improved behaviorâ€”a reduction in moral hazardâ€”, they preferred the latter because of lower cost. Increasing market transparency improves on market outcomes.
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Bibliographic InfoPaper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 426.
Date of creation: Sep 2013
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Anonymous markets; adverse selection; moral hazard; reputation building mechanisms; market transparency; market design.;
Find related papers by JEL classification:
- D47 - Microeconomics - - Market Structure and Pricing - - - Market Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-25 (All new papers)
- NEP-COM-2013-10-25 (Industrial Competition)
- NEP-CTA-2013-10-25 (Contract Theory & Applications)
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