Market transparency, adverse selection, and moral hazard

Tobias Klein, C. Lambertz, K.O. Stahl

Research output: Contribution to journal › Article › Scientific › peer-review

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.
Original languageEnglish
Pages (from-to)1677-1713
JournalJournal of Political Economy
Volume124
Issue number6
DOIs
Publication statusPublished - Dec 2016

Fingerprint

Adverse selection
Market transparency
Moral hazard
Seller
Exit
Buyers
Rating
Informational asymmetry

Keywords

  • Anonymous markets
  • Adverse Selection
  • moral hazard
  • reputation mechanisms
  • market transparency
  • market design

Cite this

Klein, Tobias ; Lambertz, C. ; Stahl, K.O. / Market transparency, adverse selection, and moral hazard. In: Journal of Political Economy. 2016 ; Vol. 124, No. 6. pp. 1677-1713.
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Klein, T, Lambertz, C & Stahl, KO 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

Market transparency, adverse selection, and moral hazard. / Klein, Tobias; Lambertz, C.; Stahl, K.O.

In: Journal of Political Economy, Vol. 124, No. 6, 12.2016, p. 1677-1713.

Research output: Contribution to journal › Article › Scientific › peer-review

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Klein T, Lambertz C, Stahl KO. Market transparency, adverse selection, and moral hazard. Journal of Political Economy. 2016 Dec;124(6):1677-1713. https://doi.org/10.1086/688875

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