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Partnerships, Lemons and Efficient Trade

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  • Moldovanu, Benny

    () (Department of Economics, University of Mannheim, Germany)

  • Fieseler, Karsten

    () (Sonderforschungsbereich 504)

  • Kittsteiner, Thomas

    () (Sonderforschungsbereich 504)

Abstract

We analyze the possibility of efficient trade with informationally interdependent valuations and with a dispersed ownership. A crucial role is played by the sign of the derivatives that measure how valuation functions depend on others’ signals. If valuations are increasing functions of other agents’ signals, it is more difficult to achieve efficient trade with interdependent values than with private values (where the respective derivatives are zero.) In contrast, if valuations are decreasing functions of other agents’ signals, it is easier to achieve efficient trade with interdependent values. Our results unify and generalize the insights of Cramton et al. [1987], Myerson and Satterthwaite [1983], and Akerlof [1970].

Suggested Citation

  • Moldovanu, Benny & Fieseler, Karsten & Kittsteiner, Thomas, 1999. "Partnerships, Lemons and Efficient Trade," Sonderforschungsbereich 504 Publications 01-18, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  • Handle: RePEc:xrs:sfbmaa:01-18
    Note: We wish to thank the German Science Foundation for financial help through SFB 504 and GK ”Finanz- und Guetermaerkte” at the University of Mannheim. We have greatly benefitted from the comments made by an associated editor and by two anonymous referees. We are also grateful to Jörg Nikutta and seminar participants at Bonn, Mannheim, University College London, and Tilburg for helpful remarks. e-mail: mold@pool.uni-mannheim.de
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    References listed on IDEAS

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    2. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
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