Date of Award
Doctor of Philosophy (PhD)
Asymmetric information can impede socially efficient trade in bilateral transactions. This dissertation consists of three essays that address how informational inefficiencies can be resolved in three different settings. These approaches to resolve the informational inefficiencies can help explain many characteristics of real estate markets, mergers and acquisitions, OTC markets, etc.
The first chapter considers the two-person bargaining problem under asymmetric information as in Myerson and Satterthwaite (1983). The famous Myerson and Satterthwaite's theorem shows that direct bilateral bargaining is generally inefficient. We show that an informed broker, acting as an intermediary between a buyer and seller, can achieve efficient trade. We provide a sufficient condition on the broker's information to achieve an efficient outcome. In the broker's optimal mechanism, while a more informed broker extracts a higher surplus, trade is still more efficient; consequently, the buyer and seller can be better off trading with a more informed broker.
In the second chapter, co-authored with Vincent Glode and Christian Opp, we analyze optimal voluntary disclosure by a privately informed buyer who faces a seller endowed with market power in a bilateral transaction. While disclosures reduce the buyer's informational advantage, they may increase his ex ante information rents by mitigating the seller's incentives to resort to inefficient screening. We show that when disclosures are restricted to be ex post verifiable, the buyer always finds it optimal to design a partial disclosure plan that implements socially efficient trade in equilibrium.
In the third chapter, co-authored with Vincent Glode and Christian Opp, we consider the limiting result of Glode and Opp (2016). We show that, generically, if efficient trade can be implemented by an incentive-compatible mechanism in direct bilateral trading, it can also be achieved in a sequential trading game with a sufficiently long chain of heterogeneously informed intermediaries.
Zhang, Xingtan, "Resolving Informational Inefficiencies In Bilateral Trade" (2017). Publicly Accessible Penn Dissertations. 2664.