Waiting for the Right Offer : Laboratory Evidence on How News Affects Bargaining and the Market for Lemons

We conduct a series of laboratory experiments to understand if gradual exogenous revelation of sellers’ private information influences how trades occur in both the competitive market and bilateral bargaining settings where a static lemon condition holds. Our experiments implement the Daley and Green (2012, 2020) models and we vary the number of buyers and quality of information across treatments. In both settings, buyers benefit from information revelation since it reduces the likelihood that low quality sellers continue to mimic high quality sellers, although only in the bilateral bargaining do buyers respond differently to the quality of information. Moreover, information revelation does not improve efficiency in either setting since buyers tend to wait for more news signals, delaying trade. While there is a quantitative deviation in the rate of experimentation between Daley and Green (2020) and our experimental results, we show that introducing inequality averse preference can diminish the gap markedly