Efficiency and Information Transmission in Bilateral Trading

Robert Shimer and Iván Werning

No 21495, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study pairwise trading mechanisms in the presence of private information and limited commitment, whereby either trader can walk away from a proposed trade when he learns the trading price. We show that when one trader's information is relevant for the other trader's value of the asset, optimal trading arrangements may necessarily conceal the traders' information. While limited commitment itself may not be costly, it shapes how prices transmit information.

JEL-codes: D82 D83 G14 (search for similar items in EconPapers)
Date: 2015-08
New Economics Papers: this item is included in nep-cta, nep-ger and nep-mic
Note: AP CF EFG
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Published as Robert Shimer & Iván Werning, 2019. "Efficiency and Information Transmission in Bilateral Trading," Review of Economic Dynamics, .

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Journal Article: Efficiency and information transmission in bilateral trading (2019)
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