Publication Type
Journal Article
Version
acceptedVersion
Publication Date
2-2026
Abstract
Efficient, voluntary bilateral trades are generally not implementable in an interdependent values environment with two-sided asymmetric information. To obtain more positive results, we consider two-stage mechanisms in which (i) the outcome (e.g., allocation of the goods) is determined first; (ii) the agents partially learn the state via their own outcome-decision payoffs; and (iii) transfers are finally made. We propose the approximate shoot-the-liar (AS) mechanism and identify Assumption 1, under which “approximately” efficient, voluntary trades are implementable. We further illustrate the permissiveness of the assumption, and characterize it in terms of the nature of interdependence in valuation functions – delineating the boundary between when Assumption 1 holds and when it fails. Finally, we characterize the conditions under which “exactly” efficient, voluntary trades can be implemented using two-stage mechanisms.
Keywords
bilateral trade, interdependent values, two-stage mechanisms.
Discipline
Economic Theory | International Economics
Research Areas
Applied Microeconomics
Publication
Journal of Mathematical Economics
Volume
122
First Page
1
Last Page
19
ISSN
0304-4068
Identifier
10.1016/j.jmateco.2025.103191
Publisher
Elsevier
Citation
KUNIMOTO, Takashi and ZHANG, Cuiling.
Efficient bilateral trade with interdependent values: The use of two-stage mechanisms. (2026). Journal of Mathematical Economics. 122, 1-19.
Available at: https://ink.library.smu.edu.sg/soe_research/2856
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jmateco.2025.103191