IDEAS home Printed from https://ideas.repec.org/p/ajk/ajkdps/284.html
   My bibliography  Save this paper

Bargaining with Binary Private Information

Author

Listed:
  • Francesc Dilmé

    (University of Bonn)

Abstract

This paper studies bargaining between a seller and a buyer with binary private valuation. Because the setting is more tractable than the case of general valuation distributions (studied in Gul et al., 1986), we are able to explicitly construct the full set of equilibria via induction. This lets us provide a simple proof of the Coase conjecture and obtain new results: The seller extracts all surplus as she becomes more patient, and the equilibrium outcome converges to the perfect-information outcome as private information vanishes. We also fully characterize the case where there is a deadline: We establish that if the probability that the buyer’s valuation is high is large enough, then the seller charges a high price at all times, there are trade bursts at the outset and the deadline, and trade occurs at a constant rate in between.

Suggested Citation

  • Francesc Dilmé, 2024. "Bargaining with Binary Private Information," ECONtribute Discussion Papers Series 284, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:284
    as

    Download full text from publisher

    File URL: https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_284_2024.pdf
    File Function: First version, 2024
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Francesco Nava & Pasquale Schiraldi, 2019. "Differentiated Durable Goods Monopoly: A Robust Coase Conjecture," American Economic Review, American Economic Association, vol. 109(5), pages 1930-1968, May.
    2. Ayça Kaya & Kyungmin Kim, 2018. "Trading Dynamics with Private Buyer Signals in the Market for Lemons," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(4), pages 2318-2352.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Heinsalu, Sander, 2020. "Investing to access an adverse selection market," International Journal of Industrial Organization, Elsevier, vol. 72(C).
    2. Dilmé, Francesc, 2019. "Dynamic quality signaling with hidden actions," Games and Economic Behavior, Elsevier, vol. 113(C), pages 116-136.
    3. Kaya, Ayça & Roy, Santanu, 2022. "Market screening with limited records," Games and Economic Behavior, Elsevier, vol. 132(C), pages 106-132.
    4. Peter Wagner, 2023. "Seller experimentation and trade," Review of Economic Design, Springer;Society for Economic Design, vol. 27(2), pages 337-357, June.
    5. Didier Laussel & Ngo Long & Joana Resende, 2022. "Asymmetric Information and Differentiated Durable Goods Monopoly: Intra-Period Versus Intertemporal Discrimination," Dynamic Games and Applications, Springer, vol. 12(2), pages 574-607, June.
    6. Rumen Kostadinov, 2024. "Regret in Durable-Good Monopoly," Department of Economics Working Papers 2024-02, McMaster University.
    7. Sarah Auster & Piero Gottardi & Ronald Wolthoff, 2022. "Simultaneous Search and Adverse Selection," Working Papers tecipa-734, University of Toronto, Department of Economics.
    8. Laussel, Didier & Long, Ngo Van & Resende, Joana, 2020. "Quality and price personalization under customer recognition: A dynamic monopoly model with contrasting equilibria," Journal of Economic Dynamics and Control, Elsevier, vol. 114(C).
    9. Maarten C.W. Janssen & Santanu Roy, 2023. "Information Uncertainty," Departmental Working Papers 2306, Southern Methodist University, Department of Economics.
    10. Markus Dertwinkel‐Kalt & Mats Köster, 2022. "Attention to online sales: The role of brand image concerns," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(1), pages 64-89, February.
    11. Buehler, Stefan & Eschenbaum, Nicolas, 2021. "Dynamic Monopoly Pricing With Multiple Varieties: Trading Up," Economics Working Paper Series 2113, University of St. Gallen, School of Economics and Political Science.
    12. Justus Preusser & Andre Speit, 2023. "Transparency in Sequential Common-Value Trade," CRC TR 224 Discussion Paper Series crctr224_2023_487, University of Bonn and University of Mannheim, Germany.
    13. Dino Gerardi & Lucas Maestri & Ignacio Monzón, 2022. "Bargaining over a Divisible Good in the Market for Lemons," American Economic Review, American Economic Association, vol. 112(5), pages 1591-1620, May.
    14. Hu, Yunzhi, 2022. "A dynamic theory of bank lending, firm entry, and investment fluctuations," Journal of Economic Theory, Elsevier, vol. 204(C).
    15. Hwang, Ilwoo, 2018. "Dynamic trading with developing adverse selection," Journal of Economic Theory, Elsevier, vol. 176(C), pages 761-802.
    16. You-hua Chen & Zhuang Zhang & Ashok K. Mishra, 2023. "A flexible and efficient hybrid agricultural subsidy design for promoting food security and safety," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-8, December.
    17. Doval, Laura & Skreta, Vasiliki, 2024. "Optimal mechanism for the sale of a durable good," Theoretical Economics, Econometric Society, vol. 19(2), May.
    18. Barsanetti, Bruno & Camargo, Braz, 2022. "Signaling in dynamic markets with adverse selection," Journal of Economic Theory, Elsevier, vol. 206(C).
    19. Ben Casner, 2021. "Learning while shopping: an experimental investigation into the effect of learning on consumer search," Experimental Economics, Springer;Economic Science Association, vol. 24(1), pages 238-273, March.
    20. Starkov, Egor, 2023. "Only time will tell: Credible dynamic signaling," Journal of Mathematical Economics, Elsevier, vol. 109(C).

    More about this item

    Keywords

    Bargaining; private information; one-sided offers;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ajk:ajkdps:284. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ECONtribute Office (email available below). General contact details of provider: https://www.econtribute.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.