Three Games of Asymmetric Information

Uncertainty complicates trading: a seller must guess the buyer's willingness to pay, the buyer must value the product, or a recruiter must screen the applicant. The thesis examines three novel settings where information asymmetry between trading partners shapes the market. 

In the first setting, employers uncertain about job applicants’ abilities may be reluctant to hire job candidates belonging to a distinct demographic group, for instance, just because other employers likewise are reluctant. The phenomenon may provide an additional explanation for discrimination in the labor market. 

In the second setting, buyers can withdraw from a trade with a seller without consequences should they find a better offer elsewhere. This setting resembles, for example, online trading between individuals. Setting a high asking price while listening to offers turns out to be an effective sales mechanism, which may be behind the observed decline of online auctions. 

In the third setting, a lenient policy towards startup acquisitions may incentivise the startup into wasting resources to appear innovative in the eyes of potential acquirers, rather than actually innovating. The research brings several new perspectives on how merger control combined with uncertainty about a startup’s prospects affects the company's incentives to innovate, enter and compete in the market.

Contact Eero Mäenpää

Email: eero.maenpaa@aalto.fi