Asymmetric Information, Adverse Selection and Online Disclosure: The Case of eBay Motors

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Asymmetric Information, Adverse Selection and Online Disclosure: The Case of eBay Motors

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dc.contributor.author Lewis, Gregory
dc.date.accessioned 2011-02-11T21:42:33Z
dc.date.issued 2009
dc.identifier.citation Lewis, Gregory. 2009. Asymmetric information, adverse selection and online disclosure: The case of eBay motors. Faculty working paper, Department of Economics, Harvard University. en_US
dc.identifier.uri http://nrs.harvard.edu/urn-3:HUL.InstRepos:4724767
dc.description.abstract Since Akerlof (1970), economists have understood the adverse selection problem that information asymmetries can create in used goods markets. The remarkable growth in online auctions of used goods, where buyers generally purchase sight unseen, therefore poses a puzzle. I argue that part of the solution is that sellers voluntarily disclose their private information to buyers through photos, text and graphics on the auction webpage. In so doing they define a precise contract between buyer and seller — to deliver the car shown — and this helps protect the buyer from adverse selection. Extending previous theoretical work by Jovanovic (1982), I model the impact of contractible disclosure and changes in disclosure costs on performance and adverse selection on online auction platforms. To test this theory, I examine data from eBay Motors. I find first that sellers selectively disclose information; second that this reduces information asymmetry; and finally that disclosure costs impact both the level of disclosure and the prices obtained by sellers, and consequently incentives for seller participation. en_US
dc.description.sponsorship Economics en_US
dc.language.iso en_US en_US
dc.relation.isversionof http://www.economics.harvard.edu/faculty/lewis/files/ebay_Jan22.pdf en_US
dash.license OAP
dc.title Asymmetric Information, Adverse Selection and Online Disclosure: The Case of eBay Motors en_US
dc.type Other en_US
dc.description.version Author's Original en_US
dash.depositing.author Lewis, Gregory
dc.date.available 2011-02-11T21:42:33Z

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  • FAS Scholarly Articles [6463]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University

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