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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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File URL: http://dx.doi.org/10.1016/j.red.2007.04.002
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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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  1. Samuelson, Larry, 1992. "Disagreement in Markets with Matching and Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 177-85, January.
  2. De Fraja, Gianni & Muthoo, Abhinay, 2000. "Equilibrium Partner Switching in a Bargaining Model with Asymmetric Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(4), pages 849-69, November.
  3. Preston McAfee, 2003. "Capacity Choice Counters the Coase Conjecture," Theory workshop papers 505798000000000046, UCLA Department of Economics.
  4. Larry M. Ausubel & Raymond J. Deneckere, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Levine's Working Paper Archive 201, David K. Levine.
  5. Ausubel, Lawrence M & Deneckere, Raymond J, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Econometrica, Econometric Society, vol. 57(3), pages 511-31, May.
  6. John G. Riley & Richard Zeckhauser, 1980. "Optimal Selling Strategies:," UCLA Economics Working Papers 180, UCLA Department of Economics.
  7. Faruk Gul & Hugo Sonnenschein & Robert Wilson, 2010. "Foundations of Dynamic Monopoly and the Coase Conjecture," Levine's Working Paper Archive 232, David K. Levine.
  8. Fudenberg, Drew & Levine, David K & Tirole, Jean, 1987. "Incomplete Information Bargaining with Outside Opportunities," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 37-50, February.
  9. William Fuchs & Andrzej Skrzypacz, 2010. "Bargaining with Arrival of New Traders," American Economic Review, American Economic Association, vol. 100(3), pages 802-36, June.
  10. Nancy L. Stokey, 1981. "Rational Expectations and Durable Goods Pricing," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 112-128, Spring.
  11. Ehrman, Carl & Peters, Michael, 1994. "Sequential Selling Mechanisms," Economic Theory, Springer, vol. 4(2), pages 237-53, March.
  12. repec:bla:restud:v:75:y:2008:i:1:p:317-332 is not listed on IDEAS
  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. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
  15. 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.
  16. Preston McAfee, R. & McMillan, John, 1988. "Search mechanisms," Journal of Economic Theory, Elsevier, vol. 44(1), pages 99-123, February.
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