Dynamic trading with developing adverse selection

• 成果类型: Article
• 署名作者: Hwang, Ilwoo
• 署名单位: University of Miami
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2018.05.002
• 发表日期: 2018
• 页码: 761-802
• 关键词: Adverse selection; learning; dynamic games; Information economics

摘要

We study a dynamic trading game in which the information asymmetry between the agents develops over time. A seller and potential buyers start out symmetrically uninformed about the quality of a good, but the seller becomes informed after the game begins. We show that this developing adverse selection gives rise to novel trading dynamics. In particular, if the seller's learning speed is high, the equilibrium features collapse-and-recovery behavior: Both the equilibrium price and the trade probability first drop and then increase over time. While the trade surplus monotonically decreases as the learning speed increases, the seller's surplus may change non-monotonically. (C) 2018 Elsevier Inc. All rights reserved.