Efficient Bilateral Trade under Sequential Revelation

Bin Liu, Jingfeng Lu and Xianwen Shi

Working Papers from University of Toronto, Department of Economics

Abstract: We study bilateral trade when private information arrives sequentially: the buyer learns her signal before the seller. In private values, this timing asymmetry restores efficiency: the efficient trade rule is implementable by a direct mechanism that is incentive compatible, exact budget balanced, and individually rational (interim for the buyer and ex ante for the seller). With interdependent values, efficiency can fail. We give primitive feasibility conditions and show that they hinge on how the seller’s cost responds to the buyer’s signal in the trading region. Allowing disclosure of the buyer’s report does not expand implementability.

Keywords: Bilateral Trade; Mixed Participation; Efficiency; Disclosure (search for similar items in EconPapers)
JEL-codes: D61 D82 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2026-01-26
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