Persuasion and Pricing: Dynamic Trading with Hard Evidence

Peter Eso and Chris Wallace
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Peter Eso: University of Oxford

CRETA Online Discussion Paper Series from Centre for Research in Economic Theory and its Applications CRETA

Abstract: In a simple trading game the buyer and seller have repeated opportunities to acquire and disclose hard (verifiable) evidence about the value of the tradable good. The parties disclose individually favourable information but conceal signals which are beneficial to the other side. In a leading case of interest with a finite horizon and sufficiently patient players, the equilibrium is characterized by a period of skimming (in which the seller makes offers acceptable only to informed buyers) concluded by a single settling period in which agreement is reached for sure. The length of delay until agreement and the corresponding efficiency loss are decreasing in the time horizon and in the abilities of the trading parties to identify the good’s value, but increasing in impatience. An arbitrarily long time horizon can generate either immediate agreement or no trade between uninformed parties.

Keywords: Persuasion; trading games; bargaining; hard evidence; information disclosure; skimming; settling; delay JEL classification numbers: C78; D82; D83 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-mic
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