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Signaling in markets with two-sided adverse selection

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Summary.

The paper analyzes an economy with two-sided adverse selection, focusing on equilibria that satisfy a refinement based on the notion of strategic stability. In the familiar case of one-sided adverse selection, agents reveal all of their private information as long as the contract space is rich enough. However, with two-sided adverse selection, the sufficient conditions for separation are much stronger.

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Authors and Affiliations

  1. Department of Economics, New York University, 269 Mercer Street, New York, NY 10003, USA (e-mail: douglas.gale@nyu.edu) , , , , , , US

    Douglas Gale

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  1. Douglas Gale
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Received: September 3, 1999; revised version: December 3, 1999

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Gale, D. Signaling in markets with two-sided adverse selection. Econ Theory 18, 391–414 (2001). https://doi.org/10.1007/PL00004191

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  • DOI: https://doi.org/10.1007/PL00004191

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