The Collateral Effects of Information in Auctions

49 Pages Posted: 1 Mar 2020 Last revised: 29 May 2020

See all articles by Rodney Ramcharan

Rodney Ramcharan

University of Southern California, Marshall School of Business

Date Written: January 31, 2020

Abstract

This paper finds that the information environment at auctions impacts prices, liquidity and participation and has aggregate implications. Using data from real estate auctions, prices and liquidity decline in auctions with more opaque information environments. Increased opacity also induces greater home bias, shrinking the distance between the point of sale and the equilibrium buyer. Assets bought in more opaque information environments also earn lower realized returns, especially for less informed buyers. The effects of information are also felt beyond the auction setting. Increased auction opacity depresses local housing markets, increases the cost of credit and causes smaller firms to fail.

Keywords: auctions, information, real estate,

JEL Classification: G12; G01; E44; G33

Suggested Citation

Ramcharan, Rodney, The Collateral Effects of Information in Auctions (January 31, 2020). Available at SSRN: https://ssrn.com/abstract=3529756 or http://dx.doi.org/10.2139/ssrn.3529756

Rodney Ramcharan (Contact Author)

University of Southern California, Marshall School of Business ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

HOME PAGE: http://https://sites.google.com/site/rodneyramcharan/

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