We study the informed principal problems in a  bilateral trade environment where both seller and buyer have private information about the types affecting their interdependent valuations. The seller has full bargaining power to offer a trading mechanism. We refine equilibria by the intuitive criterion. To eliminate each unintuitive equilibrium, we design an indirect mechanism that elicits both parties' common knowledge of the buyer's off-path belief after the mechanism itself is offered. The mechanism uses the elicited belief to decide what allocation is fully implemented. We characterize both parties' interim payoff vectors in intuitive equilibria. The result implies the uniqueness of the seller's payoff vector .
We study informed-principal problems in a simple bilateral trade environment with interdependent values. This interdependency causes the problem of multiple equilibria in the mechanism-selection game, while bilateral asymmetric information creates some difficulties in refinement analyses. Applying general methodologies of mechanism design, we show that only the principal's worst equilibrium allocation survives the intuitive criterion. We also characterize the ex-ante social surpluses in intuitive allocations. These intuitive allocations are inefficient in general owing to the effects of signaling and screening .
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the informed principal
informed-principal
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simple
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where both seller and buyer have private information about the types affecting their interdependent valuations. The seller has full bargaining power to offer a trading mechanism. We refine equilibria by the
with interdependent values. This interdependency causes the problem of multiple equilibria in the mechanism-selection game, while bilateral asymmetric information creates some difficulties in refinement analyses. Applying general methodologies of mechanism design, we show that only the principal's worst equilibrium allocation survives the
R
To eliminate each unintuitive equilibrium, we design an indirect mechanism that elicits both parties' common knowledge of the buyer's off-path belief after the mechanism itself is offered. The mechanism uses the elicited belief to decide what allocation is fully implemented. We characterize both parties' interim payoff vectors in intuitive equilibria. The result implies the uniqueness of the seller's payoff vector
We also characterize the ex-ante social surpluses in intuitive allocations. These intuitive allocations are inefficient in general owing to the effects of signaling and screening