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We analyze the double auction with two-sided incomplete information under the assumption that the parties are inequity averse. We show that if compassion is sufficiently strong, an efficient equilibrium exists, i.e. all gains of trade are realized. For the case where compassion is not as strong, trade may break down completely if envy plays a very important role. The analysis shows that bids are further away from (closer to) truth-telling the greater the importance of envy (compassion). Moreover, pooling equilibria are shown to be always more inefficient compared to the case without inequity aversion.