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Tuesday, March 2, 2021 at 4:15pm to 5:15pmVirtual Event
Doron Ravid, University of Chicago
Learning Before Trading: On the Inefficiency of Ignoring Free Information (joint w/Anne-Katrin Roesler, University of Toronto & Balázs Szentes, London School of Economics)
Abstract: This paper analyzes a bilateral trade model in which the buyer’s valuation for theobject is uncertain and she can privately purchase any signal about her valuation.The seller makes a take-it-or-leave-it offer to the buyer. The cost of a signal is smoothand increasing in informativeness. We characterize the set of equilibria when learningis free, and show they are strongly Pareto ranked. Our main result is that whenlearning is costly but the cost of information goes to zero, equilibria converge to theworst free-learning equilibrium.
If you are interested participating in this seminar, please email Ulrike Kroeller at email@example.com for Zoom information.