Price Transparency and Market Screening

In a lemons market with repeated trading by sellers with persistent private information, price transparency affects gains from trade and the market's ability to learn the seller's type. With price transparency, a class of complete-learning equilibria approaches the upper bound on gains from trade imposed by private information when the seller is patient. Without price transparency, prior work shows that complete learning is impossible and gains from trade cannot reach this bound. Price transparency changes incentives by inducing sellers to reject profitable but lower-than-expected offers to preserve future rents, allowing high quality to trade slowly without distorting low quality's trade.