Bilateral Learning Before Trading?
- Author(s)
- Maarten Janssen, Santanu Roy
- Abstract
A buyer and a seller can privately learn the quality of an asset - initially unknown to both - by incurring a fixed cost before trading. Asset quality determines their valuations and the seller makes a take-it-or-leave-it price offer. Under a weak "lemons-like" condition, asymmetric information arises endogenously when learning costs are small; as these costs vanish, the seller learns for sure but the buyer remains uninformed with probability bounded away from zero. Nevertheless, efficient limiting equilibria always exist; the buyer earns strictly positive surplus in such an equilibrium if, and only if, she can learn after knowing the price offer.
- Organisation(s)
- Department of Economics
- External organisation(s)
- Southern Methodist University
- Pages
- 1-40
- Publication date
- 10-2025
- Austrian Fields of Science 2012
- 502013 Industrial economics
- Keywords
- Portal url
- https://ucrisportal.univie.ac.at/en/publications/31462503-4f0c-4d48-9c51-60a948770853