Transparency and Distressed Sales under Asymmetric Information
We analyze price transparency in a dynamic market with private information and correlated values. Uninformed buyers compete inter- and intra-temporarily for a good that is sold by an informed seller suffering a liquidity shock. We contrast public versus private price offers and show that equilibria coincide only if offers are infrequent. All equilibria with private offers Pareto-dominate the equilibrium with public offers. If not trading by a deadline imposes an efficiency loss, public offers induce a market breakdown for some time before the deadline; in contrast, trade never stops with private offers, creating a further benefit of opacity.