Lemon faces: Showing Pictures of Buyers and Sellers reduces Trade in Markets with Asymmetric Information
SpeakerBoris van Leeuwen (Tilburg University)
LocationUniversity of Amsterdam, E 0.14
Date and time
November 24, 2022
16:00 - 17:15
Many online platforms show pictures of buyers or sellers, presumably to increase trust and trustworthiness. There can also be adverse effects of showing buyers or sellers however, as people may be influenced by irrelevant information on a picture. In this paper we study how showing pictures of buyers or sellers affect outcomes in markets with asymmetric information. In a laboratory experiment, we study classic “lemons” markets where sellers are better informed than buyers about the quality of an asset. We find that showing pictures of buyers or sellers leads to worse market outcomes. Trade is reduced when faces are displayed, and this is driven by more (high-price) offers being rejected. We explore several behavioral mechanisms that could drive this pattern. Joint paper with Bence Bago, Bruno Biais and Jean-Francois Bonnefon.