American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Mechanisms for Repeated Trade
American Economic Journal: Microeconomics
vol. 7,
no. 4, November 2015
(pp. 252–93)
Abstract
How does feasibility of efficient repeated trade depend on the features of the environment such as persistence of values, private information about their evolution, or trading frequency? We derive a necessary and sufficient condition for efficient, unsubsidized, and voluntary trade, which implies that efficient contracting requires sufficient congruence of expectations. This translates to bounds on persistence of values and on private information about their evolution, and distinguishes increasing patience from more frequent interaction; the latter need not facilitate efficiency even when the former does. We also discuss second-best mechanisms and extend the characterization to general dynamic collective choice problems. (JEL C73, D82, D86)Citation
Skrzypacz, Andrzej, and Juuso Toikka. 2015. "Mechanisms for Repeated Trade." American Economic Journal: Microeconomics, 7 (4): 252–93. DOI: 10.1257/mic.20140173Additional Materials
JEL Classification
- C73 Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
- D82 Asymmetric and Private Information; Mechanism Design
- D86 Economics of Contract: Theory
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