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Persuasion and Pricing : Dynamic Trading with Hard Evidence
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Persuasion and Pricing : Dynamic Trading with Hard Evidence

Author

Listed:
  • Eso, Peter

    (University of Oxford)

  • Wallace, Chris

    (University of Leicester)

Abstract

In a simple trading game the buyer and seller have repeated opportunities to acquire and disclose hard (verifiable) evidence about the value of the tradable good. The parties disclose individually favourable information but conceal signals which are beneficial to the other side. In a leading case of interest with a finite horizon and sufficiently patient players, the equilibrium is characterized by a period of skimming (in which the seller makes offers acceptable only to informed buyers) concluded by a single settling period in which agreement is reached for sure. The length of delay until agreement and the corresponding efficiency loss are decreasing in the time horizon and in the abilities of the trading parties to identify the good’s value, but increasing in impatience. An arbitrarily long time horizon can generate either immediate agreement or no trade between uninformed parties.

Suggested Citation

  • Eso, Peter & Wallace, Chris, 2016. "Persuasion and Pricing : Dynamic Trading with Hard Evidence," CRETA Online Discussion Paper Series 24, Centre for Research in Economic Theory and its Applications CRETA.
    • Handle: RePEc:wrk:wcreta:24
    as

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    File URL: https://warwick.ac.uk/fac/soc/economics/research/centres/creta/papers/manage/24_-_creta_wallace.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Persuasion ; trading games ; bargaining ; hard evidence ; information disclosure ; skimming ; settling ; delay JEL classification numbers: C78 ; D82 ; D83;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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