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Dynamic Bilateral Bargaining under Private Information with a Sequence of Potential Buyers

  • Roman Inderst

    (University of Frankfurt)

A seller owning a single, indivisible asset faces the random arrival of privately informed buyers, with whom he can bargain sequentially. Our key result is that despite the arrival of alternative buyers the Coase conjecture continues to hold under stationary strategies if the distribution of buyer valuations has convex support: Negotiations end almost immediately and the asset is sold almost at the minimum of the seller's own reservation value and the lowest possible valuation of a buyer. We also show existence of multiple stationary equilibria, though, in the special case where the support of buyers' valuations exhibits a sufficiently large "interior gap". Taken together, our findings thus also point to a potential pitfall when analyzing only two-type distributions in more applied work. (Copyright: Elsevier)

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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 11 (2008)
Issue (Month): 1 (January)
Pages: 220-236

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Handle: RePEc:red:issued:06-104
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Marina Azzimonti, Department of Economics, Stonybrook University, 10 Nicolls Road, Stonybrook NY 11790 USA

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  1. Preston McAfee, 2003. "Capacity Choice Counters the Coase Conjecture," Theory workshop papers 505798000000000046, UCLA Department of Economics.
  2. 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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  4. Larry M. Ausubel & Raymond J. Deneckere, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Levine's Working Paper Archive 201, David K. Levine.
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  8. Larry Samuelson, 1992. "Disagreement in Markets with Matching and Bargaining," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 177-185.
  9. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
  10. Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June.
  11. Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
  12. Andrzej Skrzypacz & William Fuchs, 2007. "Bargaining with Arrival of New Traders," 2007 Meeting Papers 186, Society for Economic Dynamics.
  13. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  14. Ehrman, Carl & Peters, Michael, 1994. "Sequential Selling Mechanisms," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(2), pages 237-53, March.
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