Stephan Lauermann Assistant Professor of Economics PhD, University of Bonn, Germany  Tel. +1 734 764 2374 e-mail: slauerma@umich.edu Main Research Focus: Economic Theory, Industrial Organization, Game Theory Teaching: Intermediate Microeconomic Theory (Econ401) More Information: Econ401.pdf Current Work: Search with Adverse Selection (joint with Asher Wolinsky) This paper looks at a model of search with adverse selection. An agent that we call the buyer samples sequentially alternative trading partners, sellers, for a transaction that involves information asymmetry. To have a story in mind, one can think of the buyer as someone who is applying for credit and who is seeking offers from potential lenders. The existence of good and bad creditors turns this into a setting with adverse selection. The main objective of this paper is to understand how the combination of search activity and adverse selection affects prices and welfare. Research Papers: Dynamic Matching and Bargaining Games: A General Approach Dynamic matching and bargaining games provide models of decentralized markets with trading frictions. A central objective of the literature is to investigate how equilibrium outcomes depend on the size of the frictions. In particular, will the outcome become efficient when frictions become small? Existing specifications of such games give different answers. To investigate what causes these differences, we identify four simple conditions on trading outcomes. We show that for every game which satisfies these conditions, the equilibrium outcome must become efficient when frictions are small. We demonstrate that our conditions hold under several specifications in the literature, suggesting a common cause behind their convergence results. These specifications include, for example, the recent contribution by Satterthwaite and Shneyerov (Econometrica, 2007.) For those specifications in the literature for which outcomes do not become efficient, we show exactly which of our conditions do not hold. These specifications include, for example, Serrano (2002, JME) and DeFraja and Sakovics (2001, JPE). Former Title: The Efficiency of Decentralized Trading (2006) Price Setting in a Decentralized Market and the Competitive Outcome (MPI Collective Goods Preprint, No. 6, 2008) This paper studies a decentralized, dynamic matching and bargaining market: buyers and sellers are matched into pairs. Traders exit the market at a constant rate, inducing search costs (frictions). All price offers are made by sellers. Despite the fact that sellers have all the bargaining power we show that they set competitive prices in the limit when frictions become small. Previous literature has restricted the sellers' bargaining power. We dispense with this restriction and show that the convergence result does not depend on the distribution of bargaining power. Our model allows us to isolate basic market clearing forces that ensure the competitive outcome in the frictionless limit. For the particular case of homogeneous sellers we characterize the equilibrium price by the familiar Lerner formula. We use this formula to provide comparative static results of the decentralized trading outcome with respect to the level of the search frictions. Former Title: A Dynamic Matching and Bargaining Game with Asymmetric Information and Price Offers When Less Information is Good for Efficiency: Private Information in Bilateral Trade and in Markets We consider a simple bilateral trading game between a seller and a buyer who have private valuations for an indivisible good. The seller makes a take-it-or-leave-it price offer. If the seller can observe the valuation of the buyer (if information is symmetric), the trading outcome is trivially efficient.  With asymmetric information, the outcome must be inefficient, as known by the Myerson-Satterthwaite Theorem. We embed this bilateral trading game into a matching market and show that this relation between information and efficiency is reversed. In particular, if information is symmetric, trading in the market is inefficient.