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Bargaining with Arrival of New Traders

  • William Fuchs
  • Andrzej Skrzypacz

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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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. D. Abreu & F. Gul, 1998. "Bargaining and Reputation," Princeton Economic Theory Papers 00s9, Economics Department, Princeton University.
  2. Jehiel, Philippe & Moldovanu, Benny, 1995. "Negative Externalities May Cause Delay in Negotiation," Econometrica, Econometric Society, vol. 63(6), pages 1321-35, November.
  3. Daniel R. Vincent, 1988. "Bargaining with Common Values," Discussion Papers 775, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. 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.
  5. 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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  12. Andrzej Skrzypacz & William Fuchs, 2009. "Bargaining with Deadlines," 2009 Meeting Papers 159, Society for Economic Dynamics.
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