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Transparency And Distressed Sales Under Asymmetric Information, William Fuchs, Andrzej Skrzypacz
Transparency And Distressed Sales Under Asymmetric Information, William Fuchs, Andrzej Skrzypacz
Cowles Foundation Discussion Papers
We analyze price transparency in a dynamic market with private information and correlated values. Uninformed buyers compete inter- and intra-temporarily for a good sold by an informed seller suffering a liquidity shock. We contrast public versus private price offers. In a two-period case all equilibria with private offers have more trade than any equilibrium with public offers; under some additional conditions we show Pareto-dominance of the private-offers equilibria. If a failure to trade by the deadline results in an efficiency loss, public offers can induce a market breakdown before the deadline, while trade never stops with private offers.