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When Trade Produces Knowledge: Dynamic Pricing, Bilateral Learning, and Trust

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  • Chupeng Xie

Abstract

A transaction can allocate a product and create information unavailable before consumption. We study dynamic pricing when a pricing agent and a buying agent hold different estimates of match value, traded outcomes update a public belief, and attributed extraction depreciates relationship capital. Public learning polarizes exchange: greater precision drives compatible delegated policies toward trade and incompatible policies toward rejection. The seller's exact expected profit must account for the fact that acceptance selects its posterior margin. Its optimal policy therefore tracks the public margin, trust distance, and posterior precision. Higher extraction reduces both current acceptance and the arrival of future outcome signals, producing a reference-respecting region and an extraction-learning trap. With unequal signal precision, the trading rule additionally selects common quality; a selection-naive learner can become more confident and less accurate. Transactions create an information externality for later participants, while a shared misspecified model can make the agents agree without becoming correct. The analysis distinguishes data production, Bayesian knowledge, relationship capital, and verified computation, and identifies the state and protocol records required to test the mechanisms.

Suggested Citation

  • Chupeng Xie, 2026. "When Trade Produces Knowledge: Dynamic Pricing, Bilateral Learning, and Trust," Papers 2607.18509, arXiv.org.
  • Handle: RePEc:arx:papers:2607.18509
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    File URL: https://arxiv.org/pdf/2607.18509
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