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Dynamic Bilateral Bargaining under Private Information with a Sequence of Potential Buyers

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Author Info
Roman Inderst (University of Frankfurt)
Abstract

A seller owning a single, indivisible asset faces the random arrival of privately informed buyers, with whom he can bargain sequentially. Our key result is that despite the arrival of alternative buyers the Coase conjecture continues to hold under stationary strategies if the distribution of buyer valuations has convex support: Negotiations end almost immediately and the asset is sold almost at the minimum of the seller's own reservation value and the lowest possible valuation of a buyer. We also show existence of multiple stationary equilibria, though, in the special case where the support of buyers' valuations exhibits a sufficiently large "interior gap". Taken together, our findings thus also point to a potential pitfall when analyzing only two-type distributions in more applied work. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2007.04.002
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 11 (2008)
Issue (Month): 1 (January)
Pages: 220-236
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Handle: RePEc:red:issued:06-104

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Related research
Keywords: Coase conjecture Bargaining

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Find related papers by JEL classification:
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. De Fraja, Gianni & Muthoo, Abhinay, 2000. "Equilibrium Partner Switching in a Bargaining Model with Asymmetric Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(4), pages 849-69, November.
  2. Nancy L. Stokey, 1981. "Rational Expectations and Durable Goods Pricing," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 112-128, Spring. [Downloadable!] (restricted)
  3. Ausubel, Lawrence M & Deneckere, Raymond J, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Econometrica, Econometric Society, vol. 57(3), pages 511-31, May. [Downloadable!] (restricted)
  4. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law & Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  5. John G. Riley & Richard Zeckhauser, 1980. "Optimal Selling Strategies:," UCLA Economics Working Papers 180, UCLA Department of Economics. [Downloadable!]
  6. Preston McAfee, 2003. "Capacity Choice Counters the Coase Conjecture," Theory workshop papers 505798000000000046, UCLA Department of Economics. [Downloadable!]
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  7. Samuelson, Larry, 1992. "Disagreement in Markets with Matching and Bargaining," Review of Economic Studies, Blackwell Publishing, vol. 59(1), pages 177-85, January. [Downloadable!] (restricted)
  8. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics. [Downloadable!]
  9. Fudenberg, Drew & Levine, David K & Tirole, Jean, 1987. "Incomplete Information Bargaining with Outside Opportunities," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 37-50, February. [Downloadable!] (restricted)
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  10. Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June. [Downloadable!] (restricted)
  11. Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, UCLA Department of Economics. [Downloadable!]
  12. Ehrman, Carl & Peters, Michael, 1994. "Sequential Selling Mechanisms," Economic Theory, Springer, vol. 4(2), pages 237-53, March.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Said, Maher, 2008. "Information Revelation and Random Entry in Sequential Ascending Auctions," MPRA Paper 7160, University Library of Munich, Germany, revised 14 May 2008. [Downloadable!]
  2. Said, Maher, 2008. "Dynamic Markets with Randomly Arriving Agents," MPRA Paper 9868, University Library of Munich, Germany. [Downloadable!]
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