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Information Uncertainty

Author

Listed:
  • Maarten C.W. Janssen

    (University of Vienna)

  • Santanu Roy

    (Southern Methodist University)

Abstract

In a market where buyers and sellers are uncertain about whether others are informed about the quality of an asset, inefficiency in trading arises due to incomplete learning. An uninformed seller will want to learn the asset's quality from the buyers' bids and may be willing to sell at low, but not at intermediate bids. Buyers may have incentives to pool their bids to prevent this type of learning. We outline conditions under which potential gains from trade cannot be realized in states where all traders are symmetrically informed or symmetrically uninformed.

Suggested Citation

  • Maarten C.W. Janssen & Santanu Roy, 2023. "Information Uncertainty," Departmental Working Papers 2306, Southern Methodist University, Department of Economics.
    • Handle: RePEc:smu:ecowpa:2306
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    References listed on IDEAS

    as
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    More about this item

    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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