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Decentralised Bilateral Trading in a Market with Incomplete Information

Author

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  • Kalyan Chatterjee

    (Department of Economics, Pennsylvania State University.)

  • Kaustav Das

    (Department of Economics, University of Exeter)

Abstract

We study a model of decentralised bilateral interactions in a small market where one of the sellers has private information about her value. There are two identical buyers and another seller, whose valuation is commonly known to be in between the two possible valuations of the informed seller. We consider two in?nite horizon games, with public and private simultaneous one-sided o¤ers respectively and simultaneous responses. We show that there is a stationary perfect Bayes?equilibrium for both models such that prices in all transactions converge to the same value as the discount factor goes to 1.

Suggested Citation

  • Kalyan Chatterjee & Kaustav Das, 2013. "Decentralised Bilateral Trading in a Market with Incomplete Information," Discussion Papers 1313, University of Exeter, Department of Economics.
    • Handle: RePEc:exe:wpaper:1313
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    References listed on IDEAS

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    1. Kalyan Chatterjee & Kaustav Das, 2015. "Decentralised bilateral trading, competition for bargaining partners and the “law of one price”," International Journal of Game Theory, Springer;Game Theory Society, vol. 44(4), pages 949-991, November.

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    More about this item

    Keywords

    Bilateral Bargaining; Incomplete information; Outside options; Coase conjecture.;
    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

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