Thumbnail Image
Item

Market transparency, adverse selection, and moral hazard

Klein,Tobias
; 
Lambertz,C.
; 
Stahl,K.O.
Abstract
We study how an improvement in market transparency affects seller exit and continuing sellers’ behavior in a market setting that involves informational asymmetries. The improvement was achieved by reducing strategic bias in buyer ratings. It led to a significant increase in buyer satisfaction with seller performance, but not to an increase in seller exit. When sellers had the choice between exiting—a reduction in adverse selection—and staying but improving behavior—a reduction in moral hazard—, they preferred the latter. Increasing market transparency led to better market outcomes.
Description
Date
2016-12
Journal Title
Journal ISSN
Volume Title
Publisher
Collections
Tilburg University Research Output Collection
Show all metadata
Files
Thumbnail Image
Market_Transparency_Adverse_Selection.pdf
Adobe PDF, 897.78 KB
Research Projects
Organizational Units
Journal Issue
Keywords
Anonymous markets, Adverse Selection, moral hazard, reputation mechanisms, market transparency, market design
Citation
Klein, T, Lambertz, C & Stahl, K O 2016, 'Market transparency, adverse selection, and moral hazard', Journal of Political Economy, vol. 124, no. 6, pp. 1677-1713. https://doi.org/10.1086/688875
URI
https://hdl.handle.net/20.500.14602/64110
Embedded videos