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Attar, Andrea
, Mariotti, Thomas and Salanié, François
(2019)
The social costs of side trading.
TSE Working Paper, n. 19-1017, Toulouse
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Abstract
We study resource allocation under private information when the planner cannot prevent bilateral side trading between consumers and firms. Adverse selection and side
trading severely restrict feasible trades: each marginal quantity must be fairly priced given the consumer types who purchase it. The resulting social costs are twofold.
First, second-best efficiency and robustness to side trading are in general irreconcilable requirements. Second, there actually exists a unique budget-feasible allocation robust to side trading, which deprives the planner from any capacity to redistribute resources
between different types of consumers. We discuss the relevance of our results for insurance and financial markets.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | June 2019 |
| Place of Publication: | Toulouse |
| Uncontrolled Keywords: | Adverse Selection, Side Trading, Second-Best Allocations. |
| JEL Classification: | D43 - Oligopoly and Other Forms of Market Imperfection D82 - Asymmetric and Private Information D86 - Economics of Contract - Theory |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Institution: | Université Toulouse 1 Capitole |
| Site: | UT1 |
| Date Deposited: | 17 Jun 2019 15:00 |
| Last Modified: | 17 Jun 2021 15:32 |
| OAI Identifier: | oai:tse-fr.eu:123102 |
| URI: | https://publications.ut-capitole.fr/id/eprint/32548 |
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