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Selling Jointly Owned Assets via Bilateral Bargaining Procedures

Listed author(s):
  • A. Banerji

    (Delhi School of Economics)

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    The paper presents a simple model to examine the problem of selling a jointly owned asset. The joint owners own fractions (shares) of the asset. The potential buyer's valuation of the asset is greater than the sum of his valuations of the individual owners' shares. (Equivalently, owners have different assets, and the buyer's valuation of the set of assets is greater than the sum of his individual valuations for the assets, owing to complementarities). It is shown that different bargaining protocols lead to different equilibrium outcomes, unlike in the case where the buyer's valuation of the asset is just the sum of his valuations of the owners' shares. Thus there may be a deadlock, or negotiations prior to bargaining, over which bargaining protocol to follow. The buyer prefers to bargain with the sellers as a single bargaining entity, while the sellers prefer not to merge, but to bargain simultaneously and independently with the buyer. Additionally, if the buyer must bargain with sellers in a sequence, the sequence he prefers is the one that reduces to the minimum a predatory effect that is present under the sequencing protocol.

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    Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 75.

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    Length: 18 pages
    Date of creation: Mar 2000
    Handle: RePEc:cde:cdewps:75
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