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Bridging the gap: Bargaining with interdependent values

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  • Fuchs, William
  • Skrzypacz, Andrzej

Abstract

We study dynamic bargaining with asymmetric information and interdependent values. We base our analysis on the equilibria characterized by Deneckere and Liang (2006) for the gap case. We show that as the gap between the cost and value of the weakest type shrinks to zero, the continuous time limit of equilibria changes dramatically from rare bursts of trade with long periods of inactivity to smooth screening over time. In the double limit prices are independent of the shape of the distribution of values. When the uninformed agentʼs ability to commit to prices disappears so do her rents, yet trade still exhibits delay.

Suggested Citation

  • Fuchs, William & Skrzypacz, Andrzej, 2013. "Bridging the gap: Bargaining with interdependent values," Journal of Economic Theory, Elsevier, vol. 148(3), pages 1226-1236.
    • Handle: RePEc:eee:jetheo:v:148:y:2013:i:3:p:1226-1236
    DOI: 10.1016/j.jet.2013.01.002
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    References listed on IDEAS

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    1. Vincent, Daniel R., 1989. "Bargaining with common values," Journal of Economic Theory, Elsevier, vol. 48(1), pages 47-62, June.
    2. Ausubel, Lawrence M & Deneckere, Raymond J, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Econometrica, Econometric Society, vol. 57(3), pages 511-531, May.
    3. Larry M. Ausubel & Raymond J. Deneckere, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Levine's Working Paper Archive 201, David K. Levine.
    4. Robert Evans, 1989. "Sequential Bargaining with Correlated Values," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(4), pages 499-510.
    5. William Fuchs & Andrzej Skrzypacz, 2010. "Bargaining with Arrival of New Traders," American Economic Review, American Economic Association, vol. 100(3), pages 802-836, June.
    6. Olsen, Trond E., 1992. "Durable goods monopoly, learning by doing and the Coase conjecture," European Economic Review, Elsevier, vol. 36(1), pages 157-177, January.
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    8. Nancy L. Stokey, 1981. "Rational Expectations and Durable Goods Pricing," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 112-128, Spring.
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    Citations

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    Cited by:

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    3. Hwang, Ilwoo & Li, Fei, 2017. "Transparency of outside options in bargaining," Journal of Economic Theory, Elsevier, vol. 167(C), pages 116-147.
    4. Fuchs, William & Öry, Aniko & Skrzypacz, Andrzej, 2016. "Transparency and distressed sales under asymmetric information," Theoretical Economics, Econometric Society, vol. 11(3), September.
    5. Makoto Hanazono & Yasutora Watanabe, 2018. "Equity bargaining with common value," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 251-292, March.
    6. Anton Tsoy, 2016. "Liquidity and Prices in Decentralized Markets with Almost Public Information," 2016 Meeting Papers 8, Society for Economic Dynamics.
    7. Dino Gerardi & Lucas Maestri & Ignacio Monzón, 2022. "Bargaining over a Divisible Good in the Market for Lemons," American Economic Review, American Economic Association, vol. 112(5), pages 1591-1620, May.
    8. Abreu, Dilip & Pearce, David G. & Stacchetti, Ennio, 2015. "One-sided uncertainty and delay in reputational bargaining," Theoretical Economics, Econometric Society, vol. 10(3), September.

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    More about this item

    Keywords

    Bargaining; Interdependent values; Coase conjecture; Delay;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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