Search with adverse selection

• Autores: Stephan Lauermann, Asher Wolinsky
• Localización: Econométrica: Journal of the Econometric Society, ISSN 0012-9682, Vol. 84, Nº 1, 2016, págs. 243-315
• Idioma: inglés
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• Resumen

  • This paper analyzes a sequential search model with adverse selection. We study information aggregation by the price—how close the equilibrium prices are to the full-information prices—when search frictions are small. We identify circumstances under which prices fail to aggregate information well even when search frictions are small. We trace this to a strong form of the winner's curse that is present in the sequential search model. The failure of information aggregation may result in inefficient allocations.