Events

Prof. Takuro Yamashita
Osaka School of International Public Policy
Osaka University

Abstract:

Traders often acquire information about the payoff state and also about other traders’ information about it. The desirable trade mechanism must control the incentives of acquisition and revelation of those information. In a stylized Akerlof-type bilateral trade context, we study subsidy minimization (revenue maximization) among efficient trade mechanisms. With a certain class of information cost functions (including those based on entropy reduction with respect to the payoff state), we show that it is without loss to focus on the mechanisms which make the seller and buyer acquire the same (i.e., perfectly correlated) information. We discuss the implications of this perfect-correlation result in terms of traders’ welfare.