Download or read book Asset Exchange with Search Frictions and Costly Information Acquisition written by Feng Dong and published by . This book was released on 2013 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper characterizes conditions under which centralized and decentralized markets (CM/DM) co-exist for asset trading. The asset payoff and trading motive are seller's private information. CM is immune to search frictions, but suffers from adverse selection. DM with bilateral trading may emerge since buyers acquire costly information on asset payoff, and offer a trading menu different from that by uninformed buyers. As matching efficiency in DM increases and the information cost decreases, more trade migrates from CM with adverse selection to DM with search frictions. We use the model to address the heterogeneous welfare effect of a government asset purchase program.