Information Design in Bilateral Trade and (Unintended) Welfare Loss
Research output: Conference Papers (RGC: 31A, 31B, 32, 33) › 32_Refereed conference paper (no ISBN/ISSN) › peer-review
Author(s)
Related Research Unit(s)
Detail(s)
| Original language | English |
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| Number of pages | 28 |
| Publication status | Published - Jun 2021 |
Conference
| Title | 2021 North American Summer Meeting of the Econometric Society (NASMES 2021) |
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| Location | Virtual |
| Place | Canada |
| City | Montreal |
| Period | 10 - 13 June 2021 |
Link(s)
| Permanent Link | https://scholars.cityu.edu.hk/en/publications/publication(fdec6a64-6e81-4be4-8c93-669324c17027).html |
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Abstract
This paper studies the impact of third-party information design on bilateral trade. A seller sets the price of a product and makes a take-it-or-leave-it oer to a buyer. A third-party information designer, who maximizes a weighted social welfare, observes the seller's pricing strategy and designs the information structure of a signal about the value of the product. The buyer observes the price, the information structure and the signal realization and decides whether to purchase the product. I characterize the set of equilibria and show that, due to the strategic interaction between the seller and the designer, third-party information design can cause a Pareto inferior outcome despite the designer's aim to maximize a weighted social welfare.
Bibliographic Note
Information for this record is supplemented by the author(s) concerned.
Citation Format(s)
Information Design in Bilateral Trade and (Unintended) Welfare Loss. / Xu, Wenji; Yang, Kai Hao.
2021. Paper presented at 2021 North American Summer Meeting of the Econometric Society (NASMES 2021), Montreal, Quebec, Canada.Research output: Conference Papers (RGC: 31A, 31B, 32, 33) › 32_Refereed conference paper (no ISBN/ISSN) › peer-review
