Bargaining over a Divisible Good in the Market for Lemons
A seller dynamically sells a divisible good to a buyer. It is common knowledge that there are gains from trade and that the gains per unit are decreasing. Payoffs are interdependent as in Akerlof's market for lemons. The seller is informed about the good's quality. The buyer makes an offer in every period and learns about the good's quality only through the seller's behavior. We characterize the stationary equilibrium when the time between offers is small. The owner of a high-quality good sells it in dribs and drabs, whereas the owner of a low-quality good constantly randomizes between selling small pieces and accepting an offer for all the remaining units. We use this characterization to analyze the limiting equilibrium outcome as the good becomes more divisible. We prove that there is slow trading: a valuable good is smoothly sold over time. In contrast, the good is never partially sold when gains per unit are increasing.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.carloalberto.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Evans, Robert, 1989. "Sequential Bargaining with Correlated Values," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 499-510, October.
- Fuchs, William & Skrzypacz, Andrzej, 2013. "Costs and Benefits of Dynamic Trading in a Lemons Market," Research Papers 2133, Stanford University, Graduate School of Business.
- Diego Moreno & John Wooders, 2013.
"Dynamic Markets for Lemons: Performance, Liquidity, and Policy Intervention,"
Working Paper Series
5, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
- Moreno, Diego & Wooders, John, 0. "Dynamic markets for lemons: performance, liquidity, and policy intervention," Theoretical Economics, Econometric Society.
- Diego Moreno & John Wooders, 2012. "Dynamic markets for lemons : performance, liquidity, and policy intervention," Economics Working Papers we1226, Universidad Carlos III, Departamento de Economía.
- Camargo, Braz & Lester, Benjamin, 2014.
"Trading dynamics in decentralized markets with adverse selection,"
Journal of Economic Theory,
Elsevier, vol. 153(C), pages 534-568.
- Ben Lester & Braz Camargo, 2011. "Trading Dynamics in Decentralized Markets with Adverse Selection," 2011 Meeting Papers 1300, Society for Economic Dynamics.
- Braz Camargo & Benjamin Lester, 2011. "Trading dynamics in decentralized markets with adverse selection," Working Papers 11-36, Federal Reserve Bank of Philadelphia.
- Ben Lester & Braz Camargo, 2010. "Trading Dynamics in Decentralized Markets with Adverse Selection," 2010 Meeting Papers 488, Society for Economic Dynamics.
- Daniel R. Vincent, 1988.
"Bargaining with Common Values,"
775, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
- Aniko Oery & Andrzej Skrzypacz & William Fuchs, 2015.
"Transparency and Distressed Sales under Asymmetric Information,"
2015 Meeting Papers
73, Society for Economic Dynamics.
- William Fuchs & Aniko Ory & Andrzej Skrzypacz, 2015. "Transparency and Distressed Sales under Asymmetric Information," Cowles Foundation Discussion Papers 1986, Cowles Foundation for Research in Economics, Yale University.
- Admati, Anat R & Perry, Motty, 1991. "Joint Projects without Commitment," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 259-76, April.
- Ausubel, Lawrence M & Deneckere, Raymond J, 1992. "Bargaining and the Right to Remain Silent," Econometrica, Econometric Society, vol. 60(3), pages 597-625, May.
- Gul, Faruk & Sonnenschein, Hugo, 1988. "On Delay in Bargaining with One-Sided Uncertainty," Econometrica, Econometric Society, vol. 56(3), pages 601-11, May.
- Samuelson, William F, 1984. "Bargaining under Asymmetric Information," Econometrica, Econometric Society, vol. 52(4), pages 995-1005, July.
- Brendan Daley & Brett Green, 2012. "Waiting for News in the Market for Lemons," Econometrica, Econometric Society, vol. 80(4), pages 1433-1504, 07.
- Fuchs, William & Skrzypacz, Andrzej, 2013. "Bridging the gap: Bargaining with interdependent values," Journal of Economic Theory, Elsevier, vol. 148(3), pages 1226-1236.
When requesting a correction, please mention this item's handle: RePEc:cca:wpaper:312. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Giovanni Bert)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.