Search With Adverse Selection

Stephan Lauermann, Asher Wolinsky

Research output: Contribution to journalArticlepeer-review

26 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)243-315
Number of pages73
JournalEconometrica
Volume84
Issue number1
DOIs
StatePublished - Jan 1 2016

Keywords

  • Adverse selection
  • Auctions
  • Information aggregation
  • Search theory
  • Winner's curse

ASJC Scopus subject areas

  • Economics and Econometrics

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