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Efficient Bilateral Trade under Sequential Revelation

Author

Listed:
  • Bin Liu
  • Jingfeng Lu
  • Xianwen Shi

Abstract

We study bilateral trade when private information arrives sequentially: the buyer learns her signal before the seller. In private values, this timing asymmetry restores efficiency: the efficient trade rule is implementable by a direct mechanism that is incentive compatible, exact budget balanced, and individually rational (interim for the buyer and ex ante for the seller). With interdependent values, efficiency can fail. We give primitive feasibility conditions and show that they hinge on how the seller’s cost responds to the buyer’s signal in the trading region. Allowing disclosure of the buyer’s report does not expand implementability.

Suggested Citation

  • Bin Liu & Jingfeng Lu & Xianwen Shi, 2026. "Efficient Bilateral Trade under Sequential Revelation," Working Papers tecipa-816, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:tecipa-816
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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