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Welfare Effects of a Concealed Information Exchange

Author

Listed:
  • Müller, Lars

    (Center for Mathematical Economics, Bielefeld University)

  • Karos, Dominik

    (Center for Mathematical Economics, Bielefeld University)

Abstract

This paper analyzes the welfare effects of private and unilateral disclosure of sensi- tive information in a sequential bargaining context. We consider a model where two sellers each propose a take-it-or-leave-it price for a homogeneous good to a single buyer. The buyer accepts or rejects the first seller’s offer before the second seller proposes her price. Crucially, the second seller might learn the first seller’s price and whether it was accepted, allowing her to update her belief about the buyer’s willingness to pay and optimize her pricing strategy. The welfare effects caused by this information exchange are evaluated under general conditions. We show that it benefits the buyer if a rejection is revealed but might harm him if an acceptance is revealed. Additionally, the information exchange improves the societal welfare by reducing inefficiencies and promoting additional trade. This paper strengthens the theoretical framework for assessing the welfare effects of information exchanges by offering new insights and providing tools to assess causality for alleged damages.

Suggested Citation

  • Müller, Lars & Karos, Dominik, 2025. "Welfare Effects of a Concealed Information Exchange," Center for Mathematical Economics Working Papers 703, Center for Mathematical Economics, Bielefeld University.
    • Handle: RePEc:bie:wpaper:703
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    File URL: https://pub.uni-bielefeld.de/download/3002629/3002630
    File Function: First Version, 2025
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