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Voluntary Disclosure of Private Information and Unraveling in the Market for Lemons: An Experiment

Goethe-Universität Frankfurt, Theodor-W.-Adorno-Platz 4, HPF 84, 60629 Frankfurt, Germany
Games 2018, 9(2), 23; https://doi.org/10.3390/g9020023
Received: 27 March 2018 / Revised: 5 May 2018 / Accepted: 7 May 2018 / Published: 10 May 2018
We experimentally analyze a lemons market with a labor-market framing. Sellers are referred to as “workers” and have the possibility to provide “employers” with costly but credible information about their “productivity”. Economic theory suggests that in this setup, unraveling takes place and a number of different types are correctly identified in equilibrium. While we do observe a substantial degree of information disclosure, we also find that unraveling is typically not as complete as predicted by economic theory. The behavior of both workers and employers impedes unraveling in that there is too little disclosure. Workers are generally reluctant to disclose their private information, and employers enforce this behavior by bidding less competitively if workers reveal compared to the case where they conceal information. View Full-Text
Keywords: asymmetric information; information disclosure; unraveling; privacy; lemons market asymmetric information; information disclosure; unraveling; privacy; lemons market
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Benndorf, V. Voluntary Disclosure of Private Information and Unraveling in the Market for Lemons: An Experiment. Games 2018, 9, 23.

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