Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296440 
Year of Publication: 
2023
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 18 [Issue:] 4 [Year:] 2023 [Pages:] 1317-1344
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
This paper addresses two central questions in markets with adverse selection: How does information impact the welfare of market participants (sellers and buyers)? Also, relatedly, what is the optimal information disclosure policy and how is it affected by the planner’s relative welfare weight on sellers’ surplus versus consumers’ surplus? We find that as a result of improved information, prices become more strongly associated with the true quality of sellers and thus more dispersed. This will result in higher total surplus. Furthermore, we find that better information has opposing welfare effects on consumers and producers that could lead to limited disclosure depending on the social objective and market characteristics.
Subjects: 
Adverse selection
consumer surplus
information design
producer surplus
JEL: 
D21
D47
D60
D82
L11
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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