Transparency and Distressed Sales Under Asymmetric Information

Transparency and Distressed Sales Under Asymmetric Information

By
William Fuchs, Aniko Öry, Andrzej Skrzypacz
Theoretical Economics. September
12, 2016, Vol. 11, Issue 3, Pages 1103-1144

We analyze price transparency in a dynamic market with private information and interdependent 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. With two opportunities to trade, 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.