Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
956922 | Journal of Economic Theory | 1997 | 29 Pages |
Abstract
I consider bilateral trade between a seller and a buyer with private valuations. The seller makes a take-it-or-leave-it price offer. If the seller observes the buyerʼs valuation (symmetric information), bilateral trade is trivially efficient. If the seller cannot observe the valuation (asymmetric information), bilateral trade is inefficient. This bilateral trading game is embedded into a large matching market. In the steady-state equilibrium of the market game, the relation between the informational regime and efficiency is inverted: With small frictions efficiency obtains if information is asymmetric. If information is symmetric, however, the trading outcome can be very inefficient-even if frictions vanish.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Stephan Lauermann,