The Social Costs of Side Trading
Bibliographic Data
| ID | 9716450 |
|---|---|
| Authors | Andrea Attar (0000-0002-2227-7508, Toulouse School of Economics, CNRS, University of Toulouse Capitole, and Università degli Studi di Roma ‘Tor Vergata’), Thomas Mariotti (0000-0002-0525-8743, Toulouse School of Economics, CNRS, and University of Toulouse Capitole), François Salanié (Toulouse School of Economics, INRAE, and University of Toulouse Capitole) |
| Year | 2020 |
| Volume | 130 |
| Issue | 630 |
| Pages | 1608-1622 |
| Publication date | 2020-08-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1093/ej/ueaa041 |
| OpenAlex | W2973010715 |
| Language | EN |
| References cited | 37 |
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 only one 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
Business · Commerce · Industrial organization · Auction Theory and Applications · Experimental Behavioral Economics Studies · Law, Economics, and Judicial Systems
| Citation velocity | historical |
|---|---|
| Highly cited | No |