IDEAS home Printed from https://ideas.repec.org/p/chu/wpaper/19-27.html
   My bibliography  Save this paper

Price Signaling and Bargains in Markets with Partially Informed Populations

Author

Listed:
  • Mark Schneider

    () (The University of Alabama, Culverhouse College of Business)

  • Daniel Graydon Stephenson

    () (Virginia Commonwealth University and Economic Science Institute, Chapman University)

Abstract

Classical studies of asymmetric information focus on situations where only one side of a market is informed. This study experimentally investigates a more general case where some sellers are informed and some buyers are informed. We establish the existence of semiseparating perfect Bayesian equilibria where prices serve as informative signals of quality to uninformed buyers, while informed buyers can often leverage their informational advantage by purchasing high quality items from uninformed sellers at bargain prices. These models provide a rational foundation for the co-existence of bargains, price signaling, and Pareto efficiency in markets with asymmetric information. We test these theoretical predictions in a controlled laboratory experiment where agents repeatedly participate in markets with asymmetric information. We observe long run behavior consistent with equilibrium predictions of price signaling, bargains, and partial-pooling behavior.

Suggested Citation

  • Mark Schneider & Daniel Graydon Stephenson, 2019. "Price Signaling and Bargains in Markets with Partially Informed Populations," Working Papers 19-27, Chapman University, Economic Science Institute.
  • Handle: RePEc:chu:wpaper:19-27
    as

    Download full text from publisher

    File URL: https://digitalcommons.chapman.edu/esi_working_papers/287/
    Download Restriction: no

    More about this item

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:chu:wpaper:19-27. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Megan Luetje). General contact details of provider: http://edirc.repec.org/data/esichus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.