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Informed agent’s advice in bargaining under two-sided incomplete information

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  • Sanghoon Kim

    (University at Buffalo, The State University of New York)

Abstract

When both a buyer and a seller have private information about their valuations of the same object, they trade the object less efficiently. A better-informed agent than the buyer and the seller can facilitate trade more efficiently by advising them with the agent’s information. However, the agent’s interest affects the validity of the agent’s advice and thus trade outcomes. When the agent’s interest is to maximize the trade probability rather than the expected transaction price, the agent is more likely to share the agent’s information with both the buyer and the seller. The information provided by the agent raises not only the trade probability but also the expected transaction price. Therefore, the attempt of the agent to raise the expected transaction price may fail, whereas the one to increase the trade probability succeeds.

Suggested Citation

  • Sanghoon Kim, 2024. "Informed agent’s advice in bargaining under two-sided incomplete information," Journal of Economics, Springer, vol. 143(2), pages 183-205, October.
    • Handle: RePEc:kap:jeczfn:v:143:y:2024:i:2:d:10.1007_s00712-024-00872-z
    DOI: 10.1007/s00712-024-00872-z
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    References listed on IDEAS

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