2011
DOI: 10.2139/ssrn.1701997
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Adverse Selection and Liquidity Distortion in Decentralized Markets

Abstract: Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in… Show more

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Cited by 29 publications
(27 citation statements)
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“…Also, smaller shocks to quality can lead to a market 5 This distinguishes us from Guerreri, Shimer and Wright (2010) that use competitive search to obtain a separating equilibrium in asset markets with adverse selection. Chang (2011) builds on this work to show that liquidity in the form of endogenous market tightness is disturbed downwards in equilibrium when there is a lemons problem for trading assets. Other papers with dynamic adverse selection also arrive at a pooling equilibrium, but by requiring that transactions have to take place at a single price (see for example Eisfeldt, 2004;Kurlat, 2010).…”
mentioning
confidence: 99%
“…Also, smaller shocks to quality can lead to a market 5 This distinguishes us from Guerreri, Shimer and Wright (2010) that use competitive search to obtain a separating equilibrium in asset markets with adverse selection. Chang (2011) builds on this work to show that liquidity in the form of endogenous market tightness is disturbed downwards in equilibrium when there is a lemons problem for trading assets. Other papers with dynamic adverse selection also arrive at a pooling equilibrium, but by requiring that transactions have to take place at a single price (see for example Eisfeldt, 2004;Kurlat, 2010).…”
mentioning
confidence: 99%
“…The general finding of this research is that, unlike in the classic Akerlof (1970) model, trade does not necessarily break down. Owners of higher quality assets can signal the quality by accepting either a lower probability of trade (Chang (2011), Guerrieri and Shimer (2014)) or longer waiting times (Daley and Green (2012), Fuchs and Skrzypacz (2014)) in return for higher prices. While the possibility to signal higher asset quality allows for all assets to be eventually traded, trade is inefficiently delayed.…”
Section: Introductionmentioning
confidence: 99%
“…7 Guerrieri et al (2010) and Chang (2011) study the adverse selection problem where the types are exogenously given and principals post offers to screen different types. In contrast to these papers, here the types are endogenously determined, which leads to a moral hazard problem.…”
Section: Introductionmentioning
confidence: 99%
“…The restriction on beliefs proposed here is similar to Guerrieri et al (2010), which is later formalized by Chang (2011). When a seller considers posting a deviating offer (q, d) / ∈ Ω, the seller expects to attract the type of buyer who is most likely to come; that is, the type of buyer who is willing to visit at the lowest matching probability.…”
mentioning
confidence: 99%