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 language | English (US) |
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Pages (from-to) | 243-315 |
Number of pages | 73 |
Journal | Econometrica |
Volume | 84 |
Issue number | 1 |
DOIs | |
State | Published - Jan 1 2016 |
Keywords
- Adverse selection
- Auctions
- Information aggregation
- Search theory
- Winner's curse
ASJC Scopus subject areas
- Economics and Econometrics