Control and Optimisation Seminar – Jacco Thyssen (York)

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Title When No One Learns, Everyone Can Coordinate: Public Signals in Dynamic Adverse Selection Abstract We consider a model with dynamic adverse selection and public news. We show that embedding simple return and buy-back options in spot sale contracts implements the full-information first-best allocation. Even if the public signal never fully reveals the seller’s private information, it remains critical for implementation. The signal serves as a coordination device that enables screening of informed agents and achieves separation at the initial stage. Strikingly, the signal’s correlation wit…