Trade among moral agents with information asymmetries

José Ignacio Rivero Wildemauwe

No 2023-10, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: This research builds an integrated chain of models to compute the economic costs of population Two agents trade an item in a simultaneous offer setting, where the exchange takes place if and only if the buyer’s bid price weakly exceeds the seller’s ask price. Each agent is randomly assigned the buyer or seller role. Both agents are characterized by a certain degree of Kantian morality, whereby they pick their bidding strategy behind a veil of ignorance, taking into account how the outcome would be affected if their trading partner were adopting their strategy. I consider two variants with asymmetric information, respectively allowing buyers to have private information about their valuation or sellers to be privately informed about the item’s quality. I show that when all trades are socially desirable, even the slightest degree of morality guarantees that the outcome is fully efficient. In turn, when quality is uncertain and some exchanges are socially undesirable, full efficiency is only achieved with sufficiently high moral standards. Moral concerns also ensure equal ex-ante treatment of the two agents in equilibrium. Finally, I show that if agents are altruistic rather than moral, inefficiencies persist even with a substantial degree of altruism.

Keywords: bilateral trade; altruism; homo moralis. (search for similar items in EconPapers)
JEL-codes: C78 D03 D82 D91 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-mac, nep-mic and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2023-10

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