This paper analyzes the effects of taxation on information acquisition and bilateral trade in decentralized markets. We show that a profit tax and a transaction tax have opposite implications for equilibrium outcome in bargaining. A marginal increase of a transaction tax increases the incentive...

This paper shows that a transaction tax makes trades in decentralized markets more information sensitive and enlarges the range of information costs for which the equilibrium exhibits private information acquisition and endogenous adverse selection. A transaction tax reduces the probability of...

This paper analyzes endogenous information provision and purchase in over-the-counter (OTC) markets. On the supply side the optimal strategy of an information provider consists of selling identical information to all OTC traders. On the demand side OTC traders have an incentive to buy...