Partnerships, Lemons and Efficient Trade
We study the possibility of efficient trade with informationally interdependent valuations. In a model based on the bilateral trade situation studied in Myerson and Satterthwaite (1983) efficient trade is only possible in trivial cases where the seller's valuation always exceeds the buyer's valuation or vice versa. In contrast to Myerson and Satterthwaite's result, trade may not occur with probability one even though it is common knowledge that trade is always efficient. This generalizes the result of Akerlof (1970). We also analyze a generalization of the model in Cramton et al. (1987) where, ex-ante, the good is jointly owned by a partnership. In contrast to the private valuations case, we can not always find a partnership that can be dissolved efficiently. This break-down occurs even for valuation functions with arbitrary small common values components.
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|Date of creation:||15 Jul 1999|
|Date of revision:|
|Note:||Fieseler, Kittsteiner, Moldovanu: Department of Economics, University of Mannheim, Seminargebäude A5, 68131 Mannheim, Germany. We are grateful to Jörg Nikutta and seminar participants at Mannheim for helpful comments. Financial Support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.|
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