Screening Competition under Flexible Information Acquisition

49 Pages Posted: 27 Oct 2020

Date Written: September 9, 2020

Abstract

This paper studies screening competition under flexible information acquisition and its interaction with price competition. Multiple homogeneous buyers play a game where they simultaneously design independent exams with pre-specified information limit on a binary-type seller. Once observing own exam's outcome, a buyer may choose to bid for the object. This paper shows that under general assumptions on information cost, binary-signal symmetric equilibrium exists and must be supported by mixed strategies. Moreover, equilibrium is inefficient and on average buyers over-reject the seller. Price regulation may help restore efficiency.

Keywords: information acquisition, screen competition, common value auction

JEL Classification: C72 D83

Suggested Citation

Fan, Yiran, Screening Competition under Flexible Information Acquisition (September 9, 2020). Available at SSRN: https://ssrn.com/abstract=3690020 or http://dx.doi.org/10.2139/ssrn.3690020

Yiran Fan (Contact Author)

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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