Information Disclosure as a Matching Mechanism: Theory and Evidence from a Field Experiment

40 Pages Posted: 8 Jul 2011

See all articles by Steven Tadelis

Steven Tadelis

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Florian Zettelmeyer

Northwestern University - Kellogg School of Management

Date Written: June 9, 2011

Abstract

Market outcomes depend on the quality of information available to its participants. We measure the effect of information disclosure on market outcomes using a large-scale field experiment that randomly discloses information about quality in wholesale automobile auctions. As the theoretical literature predicts, information disclosure increases expected revenues. However, in contrast with conventional theories, the biggest gains are for the best- and worst-quality cars. We argue that information disclosure causes better matching of heterogeneous buyers to different quality cars. This novel explanation both rationalizes patterns in our data and is confirmed by additional tests. Our findings have implications for the design of other markets, including online consumer auctions, procurement auctions, and labor markets.

Suggested Citation

Tadelis, Steven and Zettelmeyer, Florian, Information Disclosure as a Matching Mechanism: Theory and Evidence from a Field Experiment (June 9, 2011). Available at SSRN: https://ssrn.com/abstract=1872465 or http://dx.doi.org/10.2139/ssrn.1872465

Steven Tadelis (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Florian Zettelmeyer

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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