Condorelli, Daniele and Szentes, Balázs (2020) Information design in the holdup problem. Journal of Political Economy, 128 (2). pp. 681-709. doi:10.1086/704574

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Abstract

We analyze a bilateral trade model where the buyer chooses the distribution of her valuation for the good. The seller, after observing the buyer’s distribution but not the realized valuation, makes a take-it-or-leave-it offer. If distributions are costless, the price and the payoffs of both the buyer and the seller are shown to be 1/e in the unique equilibrium outcome. The buyer’s equilibrium distribution generates a unit-elastic demand, and trade is ex post efficient. These properties are shown to be preserved even when different distributions are differentially costly as long as the cost is monotone in the dispersion of the distribution.

Item Type:	Journal Article
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Economics -- Decision making, Information technology -- Economic aspects, Communication -- Technological innovations
Journal or Publication Title:	Journal of Political Economy
Publisher:	University of Chicago Press
ISSN:	0022-3808
Official Date:	February 2020
Dates:	Date Event February 2020 Published 9 January 2020 Available 9 January 2020 Accepted
Volume:	128
Number:	2
Page Range:	pp. 681-709
DOI:	10.1086/704574
Status:	Peer Reviewed
Publication Status:	Published
Publisher Statement:	© 2020 by The University of Chicago. Accepted for publication to Journal of Political Economy on 09/01/2020
Access rights to Published version:	Restricted or Subscription Access

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