The Social Costs of Side Trading

Andrea Attar, Thomas Mariotti and François Salanié ()
Additional contact information
Thomas Mariotti: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique
François Salanié: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique

Working Papers from HAL

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 a unique 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.

Keywords: Adverse Selection; Side Trading; Second-Best Allocations. (search for similar items in EconPapers)
Date: 2020-04-09
New Economics Papers: this item is included in nep-mic
Note: View the original document on HAL open archive server: https://hal.science/hal-02538295v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://hal.science/hal-02538295v1/document (application/pdf)

Related works:
Journal Article: The Social Costs of Side Trading (2020)
Working Paper: The social costs of side trading (2020)
Working Paper: The Social Costs of Side Trading (2019)
Working Paper: The Social Costs of Side Trading (2019)
Working Paper: The Social Costs of Side Trading (2019)
Working Paper: The Social Costs of Side Trading (2019)
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:hal:wpaper:hal-02538295

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().