Efficiency and information transmission in bilateral trading

Robert Shimer and Iván Werning

Review of Economic Dynamics, 2019, vol. 33, 154-176

Abstract: We study pairwise trading mechanisms in the presence of one-sided or two-sided private information and two-sided 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. (Copyright: Elsevier)

Keywords: Private information; Information diffusion; Learning from prices (search for similar items in EconPapers)
JEL-codes: D82 D83 G14 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Working Paper: Efficiency and Information Transmission in Bilateral Trading (2015)
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DOI: 10.1016/j.red.2019.02.004

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