Dynamic Bilateral Bargaining under Private Information with a Sequence of Potential Buyers
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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Volume (Year): 11 (2008)
Issue (Month): 1 (January)
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