Information revelation in a market with pairwise meetings: the one sided information case

Summary We study a market with pairwise meetings of agents and with a one sided information asymmetry regarding the state of the world, which may be low or high. We characterize the set of equilibria of the model, and study its behavior as the market becomes approximately frictionless. For any one sided information economy there is an equilibrium where trade occurs at the right price (an ex-post individually rational price). Moreover, there is an open set of economies where in all the equilibria trade occurs at the right price.We thank Douglas Gale, Jerry Green, Sergiu Hart, Andreu Mas-Colell, Eric Maskin, Thomas Sjöström, and Kathy Spier for their comments. We are grateful to a referee for correcting a mistake in an earlier draft and for providing extremely helpful suggestions. The financial support of the Fulbright — MEC program (R. Serrano) and the Sloan Foundation (O. Yosha) is acknowledged.