EconPapers    
Economics at your fingertips  
 

The Social Costs of Side Trading

Andrea Attar, Thomas Mariotti and François Salanié ()

Economic Journal, 2020, vol. 130, issue 630, 1608-1622

Abstract: We study resource allocation under private information when the planner cannot prevent bilateral side trading between consumers and firms. Adverse selection and side trading severely restrict feasible trades: each marginal quantity must be fairly priced given the consumer types who purchase it. The resulting social costs are twofold. First, second-best efficiency and robustness to side trading are in general irreconcilable requirements. Second, there actually exists only one budget-feasible allocation robust to side trading, which deprives the planner from any capacity to redistribute resources between different types of consumers. We discuss the relevance of our results for insurance and financial markets.

Date: 2020
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1093/ej/ueaa041 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Social Costs of Side Trading (2020) Downloads
Working Paper: The Social Costs of Side Trading (2020) Downloads
Working Paper: The Social Costs of Side Trading (2019) Downloads
Working Paper: The Social Costs of Side Trading (2019) Downloads
Working Paper: The Social Costs of Side Trading (2019) Downloads
Working Paper: The Social Costs of Side Trading (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:econjl:v:130:y:2020:i:630:p:1608-1622.

Access Statistics for this article

Economic Journal is currently edited by Morten Ravn

More articles in Economic Journal from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().

 
Page updated 2021-05-26
Handle: RePEc:oup:econjl:v:130:y:2020:i:630:p:1608-1622.