Asymmetric Information, Adverse Selection and Online Disclosure: The Case of eBay Motors
Since Akerlof (1970), economists have understood the adverse selection problem that information asymmetries can create in used goods markets. The remarkable growth in online used goods auctions thus poses a puzzle. Part of the solution is that sellers voluntarily disclose their private information on the auction web page. This defines a precise contract -- to deliver the car shown for the closing price -- which helps protect the buyer from adverse selection. I test this theory using data from eBay Motors, finding that online disclosures are important price determinants, and that disclosure costs impact both the level of disclosure and prices. (JEL D44, D82, L81)
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Volume (Year): 101 (2011)
Issue (Month): 4 (June)
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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