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

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Detail(s)

Original languageEnglish
Number of pages28
Publication statusPublished - Jun 2021

Conference

Title2021 North American Summer Meeting of the Econometric Society (NASMES 2021)
LocationVirtual
PlaceCanada
CityMontreal
Period10 - 13 June 2021

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, Canada.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review