Business Intelligence

When Frictions Favour Information Revelation

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Executive Summary

The authors study information revelation in markets with pair wise meetings. First, they reconsider the one-sided case within constant entry flow model. The same question has been studied in an identical framework in Serrano and Yosha (1993). They prove that there exists an additional equilibrium not detected by Serrano and Yosha (1993). They show that this equilibrium is characterized by incomplete information revelation. Until now, no equilibrium with incomplete revelation of information was known in this model. The second main result is that, at this new equilibrium, information revelation is worse when frictions are weaker. Finally, they show that those properties should also characterize some equilibria of the two-sided case studied by Wolinsky (1990).

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