Information Acquisition and Strategic Sequencing in Bilateral Trading: Is Ignorance Bliss?

This paper examines optimal sequencing of complementary deals with privately known values. It is shown that an informed buyer begins with the high value seller to minimize future holdup. Together, the buyer’s sequencing and the sellers’ pricing response determine the value of information to the buyer: it is negative for moderate complements and positive for strong complements. That is, for moderate complements the buyer would optimally sequence uninformed even with no information cost, while for strong complements she would seek unlikely deals. By mitigating the holdup, informed sequencing increases trade and thus welfare. Evidence on land assembly supports our findings.

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