Information disclosure as a matching mechanism: Theory and evidence from a field experiment

Steven Tadelis*, Florian Zettelmeyer

*Corresponding author for this work

Research output: Contribution to journalArticle

24 Scopus citations

Abstract

Market outcomes depend on the quality of information available to its participants. We measure the effect of information disclosure on market outcomes using a large-scale field experiment that randomly discloses quality information in wholesale automobile auctions. We argue that buyers in this market are horizontally differentiated across cars that are vertically ranked by quality. This implies that information disclosure helps match heterogeneous buyers to cars of varying quality, causing both good and bad news to increase competition and revenues. The data confirm these hypotheses. These findings have implications for the design of other markets, including e-commerce, procurement auctions, and labor markets.

Original languageEnglish (US)
Pages (from-to)886-905
Number of pages20
JournalAmerican Economic Review
Volume105
Issue number2
DOIs
StatePublished - Feb 1 2015

ASJC Scopus subject areas

  • Economics and Econometrics

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