IDEAS home Printed from https://ideas.repec.org/p/smu/ecowpa/2006.html
   My bibliography  Save this paper

Market Screening with Limited Records

Author

Listed:
  • Ayca Kaya

    (University of Miami)

  • Santanu Roy

    (Southern Methodist University)

Abstract

Markets differ in the availability of past trading records of their participants. In a repeated sale model with adverse selection, we study the impact of the availability of such records on trading outcomes. We consider regimes varying with respect to the length of the available records. We characterize a class of equilibria in which the record length has direct welfare implications via the market’s need to re-screen the seller, as well as indirect implications via the low quality seller’s incentives to mimic the high quality seller. As the record length increases, the market needs to re-screen less frequently, which improves efficiency. In turn, less frequent screening makes mimicking more attractive and limits the market’s ability to learn. These considerations lead to a non-monotonic relationship between record length and overall gains from trade.

Suggested Citation

  • Ayca Kaya & Santanu Roy, 2020. "Market Screening with Limited Records," Departmental Working Papers 2006, Southern Methodist University, Department of Economics.
    • Handle: RePEc:smu:ecowpa:2006
    as

    Download full text from publisher

    File URL: ftp://ftp1.economics.smu.edu/WorkingPapers/2020/ROY/ROY-2020-05.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fuchs, William & Öry, Aniko & Skrzypacz, Andrzej, 2016. "Transparency and distressed sales under asymmetric information," Theoretical Economics, Econometric Society, vol. 11(3), September.
    2. Liu, Qingmin & Skrzypacz, Andrzej, 2014. "Limited records and reputation bubbles," Journal of Economic Theory, Elsevier, vol. 151(C), pages 2-29.
    3. Eeva Mauring, 2020. "Informational Cycles in Search Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 12(4), pages 170-192, November.
    4. Kim, Kyungmin, 2017. "Information about sellers' past behavior in the market for lemons," Journal of Economic Theory, Elsevier, vol. 169(C), pages 365-399.
    5. Rosenthal, R W, 1979. "Sequences of Games with Varying Opponents," Econometrica, Econometric Society, vol. 47(6), pages 1353-1366, November.
    6. Harry Pei, 2020. "Reputation Building under Observational Learning," Papers 2006.08068, arXiv.org, revised Nov 2020.
    7. Ronel Elul & Piero Gottardi, 2015. "Bankruptcy: Is It Enough to Forgive or Must We Also Forget?," American Economic Journal: Microeconomics, American Economic Association, vol. 7(4), pages 294-338, November.
    8. Johannes Hörner & Nicolas S Lambert, 2021. "Motivational Ratings [Toward the Next Generation of Recommender Systems: A Survey of the State-of-the-Art and Possible Extensions]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(4), pages 1892-1935.
    9. Johannes Hörner & Nicolas Vieille, 2009. "Public vs. Private Offers in the Market for Lemons," Econometrica, Econometric Society, vol. 77(1), pages 29-69, January.
    10. Qingmin Liu, 2011. "Information Acquisition and Reputation Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(4), pages 1400-1425.
    11. Eeva Mauring, 2017. "Learning from Trades," Economic Journal, Royal Economic Society, vol. 0(601), pages 827-872, May.
    12. Ekmekci, Mehmet, 2011. "Sustainable reputations with rating systems," Journal of Economic Theory, Elsevier, vol. 146(2), pages 479-503, March.
    13. repec:bla:econom:v:62:y:1995:i:248:p:461-78 is not listed on IDEAS
    14. V Bhaskar & Caroline Thomas, 2019. "Community Enforcement of Trust with Bounded Memory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(3), pages 1010-1032.
    15. Eeva Mauring, 2017. "Learning from Trades," Economic Journal, Royal Economic Society, vol. 0(601), pages 827-872, May.
    16. Ayça Kaya & Kyungmin Kim, 2018. "Trading Dynamics with Private Buyer Signals in the Market for Lemons," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(4), pages 2318-2352.
    17. Harry Pei, 2020. "Reputation Effects Under Interdependent Values," Econometrica, Econometric Society, vol. 88(5), pages 2175-2202, September.
    18. Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Harry Pei, 2020. "Reputation Building under Observational Learning," Papers 2006.08068, arXiv.org, revised Nov 2020.
    2. Barsanetti, Bruno & Camargo, Braz, 2022. "Signaling in dynamic markets with adverse selection," Journal of Economic Theory, Elsevier, vol. 206(C).
    3. Harry Pei, 2022. "Reputation Effects under Short Memories," Papers 2207.02744, arXiv.org, revised Jan 2023.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sergei Kovbasyuk & Giancarlo Spagnolo, 2016. "Memory and Markets," EIEF Working Papers Series 1606, Einaudi Institute for Economics and Finance (EIEF), revised Oct 2017.
    2. Sergey Kovbasyuk & Giancarlo Spagnolo, 2024. "Memory and Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(3), pages 1775-1806.
    3. Dino Gerardi & Lucas Maestri & Ignacio Monzón, 2022. "Bargaining over a Divisible Good in the Market for Lemons," American Economic Review, American Economic Association, vol. 112(5), pages 1591-1620, May.
    4. Hwang, Ilwoo, 2018. "Dynamic trading with developing adverse selection," Journal of Economic Theory, Elsevier, vol. 176(C), pages 761-802.
    5. Harry Pei, 2020. "Reputation Building under Observational Learning," Papers 2006.08068, arXiv.org, revised Nov 2020.
    6. Benjamin Sperisen, 2018. "Bad Reputation Under Bounded And Fading Memory," Economic Inquiry, Western Economic Association International, vol. 56(1), pages 138-157, January.
    7. Daniel Monte & Roberto Pinheiro, 2017. "Costly Information Intermediation as a Natural Monopoly," Working Papers (Old Series) 1721, Federal Reserve Bank of Cleveland.
    8. Eeva Mauring, 2020. "Informational Cycles in Search Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 12(4), pages 170-192, November.
    9. Yingkai Li & Harry Pei, 2020. "Equilibrium Behaviors in Repeated Games," Papers 2007.14002, arXiv.org, revised Feb 2021.
    10. Hakenes, Hendrik & Katolnik, Svetlana, 2017. "On the incentive effects of job rotation," European Economic Review, Elsevier, vol. 98(C), pages 424-441.
    11. Li, Yingkai & Pei, Harry, 2021. "Equilibrium behaviors in repeated games," Journal of Economic Theory, Elsevier, vol. 193(C).
    12. Sperisen, Benjamin, 2018. "Bounded memory and incomplete information," Games and Economic Behavior, Elsevier, vol. 109(C), pages 382-400.
    13. Harry Pei, 2022. "Reputation Effects under Short Memories," Papers 2207.02744, arXiv.org, revised Jan 2023.
    14. Eeva Mauring, 2020. "Informational Cycles in Search Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 12(4), pages 170-192, November.
    15. Peter Wagner, 2023. "Seller experimentation and trade," Review of Economic Design, Springer;Society for Economic Design, vol. 27(2), pages 337-357, June.
    16. Wang, Yan & Yang, Jian & Qi, Lian, 2017. "A game-theoretic model for the role of reputation feedback systems in peer-to-peer commerce," International Journal of Production Economics, Elsevier, vol. 191(C), pages 178-193.
    17. Hwang, Ilwoo & Li, Fei, 2017. "Transparency of outside options in bargaining," Journal of Economic Theory, Elsevier, vol. 167(C), pages 116-147.
    18. Nuh Aygün Dalkıran, 2016. "Order of limits in reputations," Theory and Decision, Springer, vol. 81(3), pages 393-411, September.
    19. Barsanetti, Bruno & Camargo, Braz, 2022. "Signaling in dynamic markets with adverse selection," Journal of Economic Theory, Elsevier, vol. 206(C).
    20. Ben Casner, 2021. "Learning while shopping: an experimental investigation into the effect of learning on consumer search," Experimental Economics, Springer;Economic Science Association, vol. 24(1), pages 238-273, March.

    More about this item

    Keywords

    Repeated sales; adverse selection; lemons market; transparency; limited records.;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:smu:ecowpa:2006. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ömer Özak (email available below). General contact details of provider: http://www.smu.edu/economics .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.