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Bilateral trade with a benevolent intermediary

Author

Listed:
  • Eilat, Ran

    (Department of Economics, Ben-Gurion University of the Negev)

  • Pauzner, Ady

    (The Eitan Berglas School of Economics, Tel-Aviv University)

Abstract

We study intermediaries who seek to maximize gains from trade in bilateral negotiations. Intermediaries are players: they cannot commit to act against their objective function and deny, in some cases, trade they believe to be beneficial. This impairs their ability to assist the parties relative to conventional mechanisms. We analyze this limited commitment environment as a standard mechanism design problem with an additional "credibility" constraint, requiring that every outcome be interim-optimal conditional on available information. We investigate how such intermediaries communicate with the parties, analyze the tradeoffs they face and study the bounds on what they can achieve.

Suggested Citation

  • Eilat, Ran & Pauzner, Ady, 2021. "Bilateral trade with a benevolent intermediary," Theoretical Economics, Econometric Society, vol. 16(4), November.
    • Handle: RePEc:the:publsh:3703
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    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20211655/32399/938
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    Cited by:

    1. Péter Eso & Chris Wallace, 2022. "Evidence Disclosure in Competitive Markets," Economics Series Working Papers 980, University of Oxford, Department of Economics.

    More about this item

    Keywords

    Intermediation; mechanism design; imperfect commitment; asymmetric information; bilateral trade;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • 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

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