UCL Department of Economics


Theoretical and Behavioural Economics Seminar - João Thereze (Duke BS)

20 February 2024, 4:30 pm–6:00 pm

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João Thereze (Duke BS) will be presenting at this seminar.

Event Information

Open to



Duarte Gonçalves/Deniz Kattwinkel

Location: B03 Ricardo LT, Drayton House

Title: Adverse Selection and Endogenous Information 

Abstract: We study adverse selection markets where consumers can choose to learn how much they value a product. Information is acquired after observing prices, so it is endogenous. This presents a trade-off: information increases the quality of consumers’ choices but worsens selection. We characterize how this trade-off translates into distortions of consumers’ demand and producers’ cost. Then, we show that information decisions produce a negative externality, may decrease welfare, and may lead to new forms of market breakdown. Moreover, efficiency is typically non-monotone in information costs. Two implications are that (1) standard measures underestimate the welfare costs of adverse selection; and (2) information policies can help correct its inefficiencies. Finally, we propose an empirical test to detect endogenous information in the data, and develop a framework for counterfactual policy analysis.