Bilateral trade with a benevolent intermediary

Ran Eilat () and Ady Pauzner ()
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Ran Eilat: Department of Economics, Ben-Gurion University of the Negev
Ady Pauzner: The Eitan Berglas School of Economics, Tel-Aviv University

Theoretical Economics, 2021, vol. 16, issue 4

Abstract: We study intermediaries who seek to maximize gains from trade in bilateral negotiations. Intermediaries are players: they cannot commit to act against their objective function and deny, in some cases, trade they believe to be beneficial. This impairs their ability to assist the parties relative to conventional mechanisms. We analyze this limited commitment environment as a standard mechanism design problem with an additional "credibility" constraint, requiring that every outcome be interim-optimal conditional on available information. We investigate how such intermediaries communicate with the parties, analyze the tradeoffs they face and study the bounds on what they can achieve.

Keywords: Intermediation; mechanism design; imperfect commitment; asymmetric information; bilateral trade (search for similar items in EconPapers)
JEL-codes: C72 D82 D83 (search for similar items in EconPapers)
Date: 2021-11-08
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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