Screening Competition under Flexible Information Acquisition
49 Pages Posted: 27 Oct 2020
Date Written: September 9, 2020
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: Suggested Citation