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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Bibliographic InfoPaper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 08-11.
Date of creation: 2008
Date of revision:
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Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126
Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/
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Other versions of this item:
- 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-2008-09-13 (All new papers)
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