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Bargaining with Arrival of New Traders

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  • William Fuchs
  • Andrzej Skrzypacz

Abstract

We study dynamic bargaining with asymmetric information and arrival of exogenous events, which represent arrival of traders or information. We characterize the unique limit of stationary equilibria with frequent offers. The possibility of arrivals changes equilibrium dynamics. There is delay in equilibrium, and the seller slowly screens out buyers with higher valuations. The seller payoff equals what he can achieve by simply awaiting an arrival. In applications, when buyer valuations fall, average prices drop and delay increases. Surplus division depends on relative arrival rates of buyers/sellers and expected time to trade is a nonmonotonic function of the arrival rate. (JEL C78, D82)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 100 (2010)
Issue (Month): 3 (June)
Pages: 802-36

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Handle: RePEc:aea:aecrev:v:100:y:2010:i:3:p:802-36

Note: DOI: 10.1257/aer.100.3.802
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  1. Peter M. DeMarzo & Branko Uro, 2006. "Ownership Dynamics and Asset Pricing with a Large Shareholder," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 774-815, August.
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  7. Vincent, Daniel R., 1989. "Bargaining with common values," Journal of Economic Theory, Elsevier, vol. 48(1), pages 47-62, June.
  8. Chatterjee, Kalyan & Samuelson, Larry, 1987. "Bargaining with Two-Sided Incomplete Information: An Infinite Horizon Model with Alternating Offers," Review of Economic Studies, Wiley Blackwell, vol. 54(2), pages 175-92, April.
  9. Arial Rubinstein & Asher Wolinsky, 1985. "Equilibrium in a Market with Sequential Bargaining," Levine's Working Paper Archive 623, David K. Levine.
  10. Jehiel, Philippe & Moldovanu, Benny, 1995. "Negative Externalities May Cause Delay in Negotiation," Econometrica, Econometric Society, vol. 63(6), pages 1321-35, November.
  11. Nancy L. Stokey, 1981. "Rational Expectations and Durable Goods Pricing," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 112-128, Spring.
  12. Muhamet Yildiz, 2004. "Waiting to Persuade," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 223-248, February.
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Cited by:
  1. Qingmin Liu & Konrad Mierendorff & Xianwen Shi, 2013. "Auctions with Limited Commitment," Working Papers tecipa-504, University of Toronto, Department of Economics.
  2. Mikhail Drugov, 2010. "Information and delay in an agency model," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 598-615.
  3. Ilwoo Hwang, 2013. "A Theory of Bargaining Deadlock," PIER Working Paper Archive 13-050, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  4. Abreu, Dilip & Pearce, David G. & Stacchetti, Ennio, 0. "One-sided uncertainty and delay in reputational bargaining," Theoretical Economics, Econometric Society.
  5. Fuchs, William & Skrzypacz, Andrzej, 2013. "Bridging the gap: Bargaining with interdependent values," Journal of Economic Theory, Elsevier, vol. 148(3), pages 1226-1236.
  6. Roman Inderst, 2008. "Dynamic Bilateral Bargaining under Private Information with a Sequence of Potential Buyers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 220-236, January.
  7. Zhiguo He & Gregor Matvos, 2012. "Debt and Creative Destruction: Why Could Subsidizing Corporate Debt be Optimal?," NBER Working Papers 17920, National Bureau of Economic Research, Inc.
  8. Said, Maher, 2008. "Dynamic Markets with Randomly Arriving Agents," MPRA Paper 9868, University Library of Munich, Germany.
  9. Said, Maher, 2008. "Information Revelation and Random Entry in Sequential Ascending Auctions," MPRA Paper 7160, University Library of Munich, Germany.

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