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Information design in the hold-up problem

Condorelli, Daniele and Szentes, Balázs (2019) Information design in the hold-up problem. Journal of Political Economy. ISSN 0022-3808

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Identification Number: 10.1086/704574


We analyze a bilateral trade model where the buyer can choose the probability distribution of her valuation for the good. The seller, after observing the buyer’s choice of the distribution but not the realized valuation, makes a take-it-or-leave-it offer. If the buyer’s choice of the distribution is 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 equilibrium distribution of the buyer’s valuation generates a unit-elastic demand and trade is ex-post efficient. These two 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: Article
Official URL:
Additional Information: © 2018 The University of Chicago
Divisions: Economics
Subjects: H Social Sciences > HF Commerce
Sets: Departments > Economics
Date Deposited: 20 Nov 2018 12:19
Last Modified: 15 Jan 2020 00:02

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