Welfare Effects of a Concealed Information Exchange

Lars Müller and Dominik Karos
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Lars Müller: Center for Mathematical Economics, Bielefeld University
Dominik Karos: Center for Mathematical Economics, Bielefeld University

No 703, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: This paper analyzes the welfare effects of private and unilateral disclosure of sensi- tive information in a sequential bargaining context. We consider a model where two sellers each propose a take-it-or-leave-it price for a homogeneous good to a single buyer. The buyer accepts or rejects the first seller’s offer before the second seller proposes her price. Crucially, the second seller might learn the first seller’s price and whether it was accepted, allowing her to update her belief about the buyer’s willingness to pay and optimize her pricing strategy. The welfare effects caused by this information exchange are evaluated under general conditions. We show that it benefits the buyer if a rejection is revealed but might harm him if an acceptance is revealed. Additionally, the information exchange improves the societal welfare by reducing inefficiencies and promoting additional trade. This paper strengthens the theoretical framework for assessing the welfare effects of information exchanges by offering new insights and providing tools to assess causality for alleged damages.

Keywords: Information Exchange; Collusion; Unawareness (search for similar items in EconPapers)
Pages: 32
Date: 2025-04-16
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https://pub.uni-bielefeld.de/download/3002629/3002630 First Version, 2025 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:703

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