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No Trade

Carrillo, Juan D. and Palfrey, Thomas R. (2007) No Trade. Social Science Working Paper, 1279. California Institute of Technology , Pasadena, CA. (Unpublished)

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We investigate, in a simple bilateral bargaining environment, the extent to which asymmetric information can induce individuals to engage in exchange where trade is not mutually profitable. We first establish a no-trade theorem for this environment. A laboratory experiment is conducted, where trade is found to occur between 16% and 32% of the time, depending on the specific details of the environment and trading mechanism. In most cases, buyers gain from such exchange, at the expense of sellers. An equilibrium model with naïve, or ”cursed,” beliefs accounts for some of the behavior findings, but open questions remain.

Item Type:Report or Paper (Working Paper)
Related URLs:
URLURL TypeDescription ItemPublished Version
Palfrey, Thomas R.0000-0003-0769-8109
Additional Information:Original version May 2006. Part of this research was conducted while the first author was visiting Caltech. The hospitality of the institution is greatly appreciated. We also gratefully acknowledge the financial support of the National Science Foundation (SES-0450712, SES-0094800, SES-0617820), The Princeton Laboratory for Experimental Social Science, The Gordon and Betty Moore Foundation. We thank Shivani Nayyar, Uliana Popova, Stephanie Wang, Rumen Zarev and Yi Zhu for research assistance.
Group:Social Science Working Papers
Funding AgencyGrant Number
Princeton Laboratory for Experimental Social Science (PLESS)UNSPECIFIED
Gordon and Betty Moore FoundationUNSPECIFIED
Subject Keywords:bilateral bargaining, private information, no trade theorem, experimental economics
Series Name:Social Science Working Paper
Issue or Number:1279
Classification Code:JEL: O24, O26
Record Number:CaltechAUTHORS:20170728-151244423
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79559
Deposited By: Jacquelyn Bussone
Deposited On:02 Aug 2017 18:37
Last Modified:22 Nov 2019 09:58

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