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Informed Principal Problems in Bilateral Trading

Takeshi Nishimura

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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 identify a necessary and sufficient condition for this equilibrium to be undominated for the principal. We also show that this is the unique equilibrium that survives the intuitive criterion.

Date: 2019-06, Revised 2021-12
New Economics Papers: this item is included in nep-des and nep-mic
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