Informed principal problems in bilateral trading

Takeshi Nishimura

Journal of Economic Theory, 2022, vol. 204, issue C

Abstract: We study bilateral trade with interdependent values as an informed-principal problem. The mechanism-selection game has multiple equilibria that differ with respect to principal's payoff and trading surplus. We characterize the equilibrium that is worst for every type of principal, and characterize the conditions under which there are no equilibria with different payoffs for the principal. We also show that this is the unique equilibrium that survives the intuitive criterion.

Keywords: Informed principal; Bilateral trade; Interdependent values; Rothschild–Stiglitz–Wilson allocation; Intuitive criterion (search for similar items in EconPapers)
JEL-codes: C72 D82 D86 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:204:y:2022:i:c:s0022053122000886

DOI: 10.1016/j.jet.2022.105498

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