IDEAS home Printed from https://ideas.repec.org/a/eee/gamebe/v107y2018icp380-395.html
   My bibliography  Save this article

Bilateral trade with strategic gradual learning

Author

Listed:
  • Eliaz, Kfir
  • Frug, Alexander

Abstract

We propose a model of bilateral trade in which private information about the quality of an asset can be acquired only gradually over time. An asset is characterized by a vector of binary i.i.d. attributes, and its worth to a player is equal to a weighted sum of the attributes' values (where weights differ across players). The seller is initially uninformed about the attributes' values, and each period he decides whether to make a price offer or to costlessly inspect an attribute's value. The buyer does not know the attributes' values, but he may or may not observe which inspections were performed (we consider both cases). We study the seller's strategic scheduling of inspections and its effect on the realized gains from trade in equilibrium. We identify the necessary and sufficient conditions under which the players can realize some gains from trade, and all gains from trade.

Suggested Citation

  • Eliaz, Kfir & Frug, Alexander, 2018. "Bilateral trade with strategic gradual learning," Games and Economic Behavior, Elsevier, vol. 107(C), pages 380-395.
    • Handle: RePEc:eee:gamebe:v:107:y:2018:i:c:p:380-395
    DOI: 10.1016/j.geb.2017.10.026
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0899825617302014
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.geb.2017.10.026?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Patrick Bolton & Antoine Faure-Grimaud, 2010. "Satisficing Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(3), pages 937-971.
    2. Fernando Branco & Monic Sun & J. Miguel Villas-Boas, 2012. "Optimal Search for Product Information," Management Science, INFORMS, vol. 58(11), pages 2037-2056, November.
    3. Frug, Alexander, 2018. "Strategic gradual learning and information transmission," Journal of Economic Theory, Elsevier, vol. 177(C), pages 594-615.
    4. Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, vol. 68(1), pages 135-148, January.
    5. Dang, Tri Vi, 2008. "Bargaining with endogenous information," Journal of Economic Theory, Elsevier, vol. 140(1), pages 339-354, May.
    6. Levin, Jonathan, 2001. "Information and the Market for Lemons," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 657-666, Winter.
    7. Curtis R. Taylor, 1999. "Time-on-the-Market as a Sign of Quality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(3), pages 555-578.
    8. Ilan Guttman & Ilan Kremer & Andrzej Skrzypacz, 2014. "Not Only What but Also When: A Theory of Dynamic Voluntary Disclosure," American Economic Review, American Economic Association, vol. 104(8), pages 2400-2420, August.
    9. Dirk Bergemann & Juuso Valimaki, 2002. "Information Acquisition and Efficient Mechanism Design," Econometrica, Econometric Society, vol. 70(3), pages 1007-1033, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Frug, Alexander, 2018. "Strategic gradual learning and information transmission," Journal of Economic Theory, Elsevier, vol. 177(C), pages 594-615.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eliaz, Kfir & Frug, Alexander, 2016. "When to Learn What in Bilateral Trade," CEPR Discussion Papers 11350, C.E.P.R. Discussion Papers.
    2. Chen, Yan & He, YingHua, 2021. "Information acquisition and provision in school choice: An experimental study," Journal of Economic Theory, Elsevier, vol. 197(C).
    3. Athey, Susan & Levin, Jonathan, 2018. "The value of information in monotone decision problems," Research in Economics, Elsevier, vol. 72(1), pages 101-116.
    4. Yan Chen & YingHua He, 2022. "Information acquisition and provision in school choice: a theoretical investigation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(1), pages 293-327, July.
    5. Lang, Ruitian, 2019. "Try before you buy: A theory of dynamic information acquisition," Journal of Economic Theory, Elsevier, vol. 183(C), pages 1057-1093.
    6. Miettinen, Paavo, 2017. "Information acquisition during a descending price auction with asymmetrically informed players," Research Discussion Papers 5/2017, Bank of Finland.
    7. Miettinen, Paavo, 2017. "Information acquisition during a descending price auction with asymmetrically informed players," Bank of Finland Research Discussion Papers 5/2017, Bank of Finland.
    8. Leandro Arozamena & Estelle Cantillon, 2004. "Investment Incentives in Procurement Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(1), pages 1-18.
    9. Roesler, Anne-Katrin & Deb, Rahul, 2021. "Multi-Dimensional Screening: Buyer-Optimal Learning and Informational Robustness," CEPR Discussion Papers 16206, C.E.P.R. Discussion Papers.
    10. Obara Ichiro, 2008. "The Full Surplus Extraction Theorem with Hidden Actions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-28, March.
    11. Peter Wagner, 2023. "Seller experimentation and trade," Review of Economic Design, Springer;Society for Economic Design, vol. 27(2), pages 337-357, June.
    12. Ekmekci, Mehmet & Kos, Nenad, 2023. "Signaling covertly acquired information," Journal of Economic Theory, Elsevier, vol. 214(C).
    13. Todd Kaplan, 2012. "Communication of preferences in contests for contracts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(2), pages 487-503, October.
    14. Juan José Ganuza & José S. Penalva, 2006. "On information and competition in private value auctions," Economics Working Papers 937, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2006.
    15. Matsushima, Hitoshi & Noda, Shunya, 2023. "Mechanism design with general ex-ante investments," Journal of Mathematical Economics, Elsevier, vol. 106(C).
    16. Hernando-Veciana, Ángel, 2009. "Information acquisition in auctions: Sealed bids vs. open bids," Games and Economic Behavior, Elsevier, vol. 65(2), pages 372-405, March.
    17. Szalay, Dezsö, 2009. "Contracts with endogenous information," Games and Economic Behavior, Elsevier, vol. 65(2), pages 586-625, March.
    18. repec:zbw:bofrdp:2012_008 is not listed on IDEAS
    19. Dirk Bergemann & Xianwen Shi & Juuso Valimaki, 2009. "Information Acquisition in Interdependent Value Actions," Journal of the European Economic Association, MIT Press, vol. 7(1), pages 61-89, March.
    20. Li, Yunan, 2019. "Efficient mechanisms with information acquisition," Journal of Economic Theory, Elsevier, vol. 182(C), pages 279-328.
    21. Jacques Crémer & Yossi Spiegel & Charles Zheng, 2009. "Auctions with costly information acquisition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(1), pages 41-72, January.

    More about this item

    Keywords

    Strategic scheduling; Gradual learning; Endogenous asymmetric information; Gains from trade;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:gamebe:v:107:y:2018:i:c:p:380-395. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622836 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.