Efficient Bilateral Trade⇤

We re-examine the canonical question of Myerson and Satterthwaite (1983) whether two privately-informed parties, a buyer and a seller, can trade an indivisible good efficiently. We relax their assumption that utilities are quasi-linear; our main assumption instead is that the traded good is normal. We show that efficient trade is possible if agents ’ utility functions are not too responsive to private information. In addition, we provide natural examples in which efficient trade is possible even though agents ’ utility functions are highly responsive to their private information.