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Article Dans Une Revue The Japanese Economic Review Année : 2022

Adverse selection and bounded rationality: an impossibility theorem

Résumé

We consider an adverse selection environment between an informed seller and an uninformed buyer, where no trade occurs when all buyers are the standard Bayesian-rational type. The buyer may be a “behavioral” type in that he may take actions different from the rational type. We show that, for any incentive-feasible mechanism with any non-trivial trade, the buyer’s ex-ante expected payoff is strictly negative. Our result implies that whenever trade occurs, some behavioral types must incur losses—highlighting a new trade-off between social surplus and buyer protection.
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hal-04047796 , version 1 (27-03-2023)

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Takeshi Murooka, Takuro Yamashita. Adverse selection and bounded rationality: an impossibility theorem. The Japanese Economic Review, 2022, ⟨10.1007/s42973-022-00119-w⟩. ⟨hal-04047796⟩
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