On bargaining with endogenous information

Tri Vi Dang

No 05-38, Papers from Sonderforschungsbreich 504

Abstract: Two ex ante identically informed agents play a double auction over the division of a trading surplus with endogenous information and common values. This paper shows that if information acquisition is not observable, three types of inefficiencies can arise. If the information cost is in an intermediate range, no pure strategy equilibrium with trade exists although the agents maintain symmetric information. If the information cost is low, any trading equilibrium exhibits costly information acquisition. If the agents face asymmetric information cost the Akerlof’s lemons problem arises as a self-fulfilling equilibrium and only partial trade occurs.

Keywords: double auction; endogenous lemons problem; information acquisition; speculation (search for similar items in EconPapers)
JEL-codes: C78 D82 D83 (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:mnh:spaper:2623

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