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https://doi.org/10.2139/ssrn.2988668
Copy DOIJournal: SSRN Electronic Journal | Publication Date: Jun 20, 2017 |
Citations: 3 |
I analyse a market with asymmetric information, interdependent values and trade frictions. The frictions can be reduced at a cost, e.g. by increasing attention, search, lobbying or computing power. For some parameters, there is a unique equilibrium in which an increase in the gains from trade delays trade. A rise in the trading surplus may reduce the payoff of all types. The driving force is a novel feedback loop between the endogenous trading frictions and the signalling motive.
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