What to Put on the Table
AbstractThis paper investigates under which circumstances negotiating simultaneously over multiple issues or assets helps reduce inefficiencies due to the presence of asymmetric information. We find that a simultaneous negotiation over multiple assets that are substitutes reduces inefficiencies. The effect is stronger if goods are heterogeneous, and in this case the inefficiency can be eliminated altogether. When assets are not substitutes inefficiencies always prevail. We also study cases where co-ownership is possible (partnerships), allowing for asymmetric distributions, general valuation functions and for multiple assets. We show that efficient dissolution is possible if all agents valuations at their types where gains of trade are minimal are equal. For this to hold, the agent that most likely has the highest valuation for a given asset should initially own a bigger share of that asset. We discuss implications of these findings for the design of partnerships and joint ventures. JEL classification codes: C72, D82, L14.
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Date of creation: 10 Aug 2007
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Other versions of this item:
- Vasiliki Skreta & Nicolas Figueroa, 2008. "What to Put on the Table," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 08-11, New York University, Leonard N. Stern School of Business, Department of Economics.
- Nicolas Figueroa & Vasiliki Skreta, 2007. "What to put in the table," Documentos de Trabajo, Centro de EconomÃa Aplicada, Universidad de Chile 237, Centro de Economía Aplicada, Universidad de Chile.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-27 (All new papers)
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