Yamashita, Takuro and Murooka, Takeshi (2021) A Note on Adverse Selection and Bounded Rationality. TSE Working Paper, n. 21-1244, Toulouse

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Abstract

We consider an adverse selection environment between an informed seller and an uninformed buyer, where no trade occurs when all buyers are rational. The buyer may be a “behavioral” type in the sense that he may take actions different from a rational type. We show that, for any incentive-feasible mechanism with any non-trivial trade, the buyer’s ex-ante expected payoff is strictly negative. Our result implies that whenever trade occurs, some behavioral types must incur losses.

Item Type: Monograph (Working Paper)
Language: English
Date: September 2021
Place of Publication: Toulouse
Uncontrolled Keywords: Adverse selection, Inferential naivety, Mechanism design, Behavioral contract theory, Consumer protection
JEL Classification: D82 - Asymmetric and Private Information
D89 - Other
D90 - General
D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 08 Sep 2021 08:45
Last Modified: 08 Sep 2021 08:45
OAI Identifier: oai:tse-fr.eu:125926
URI: https://publications.ut-capitole.fr/id/eprint/43799
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