Bargaining with Arrival of New Traders
A seller meets a potential buyer who has private information about her valuation of the asset. They bargain dynamically over the transaction price. The bargaining is affected by the possibility of arrival of new traders. Possibility of arrivals determines endogenously outside options of the players. We characterize the unique stationary equilibrium of this game and in particular the dynamics of trade and prices in the limit as the time between offers goes to zero. As a general result we provide conditions for when the Coase conjecture does not hold. The main relevant factor is that the seller's expected payoff conditional on arrival of an event is sensitive to the buyer's value (for example, because if a second buyer arrives the seller runs an auction to allocate the asset). We show that the expected time to trade is a non-monotonic function of the arrival rate. Applying the model to arrival of a second trader (buyer or seller) with common value, we show that when buyer valuations fall, average transaction prices drop and the average time on the market gets longer.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
More information through EDIRC
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.:
- D. Abreu & F. Gul, 1998.
"Bargaining and Reputation,"
Princeton Economic Theory Papers
00s9, Economics Department, Princeton University.
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
252, David K. Levine.
- In-Koo Cho, 1990.
"Uncertainty and Delay in Bargaining,"
Review of Economic Studies,
Oxford University Press, vol. 57(4), pages 575-595.
- Daniel R. Vincent, 1988.
"Bargaining with Common Values,"
775, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Peter C. Cramton, 1984. "Bargaining with Incomplete Information: An Infinite-Horizon Model with Two-Sided Uncertainty," Review of Economic Studies, Oxford University Press, vol. 51(4), pages 579-593.
- Andrzej Skrzypacz & William Fuchs, 2009. "Bargaining with Deadlines," 2009 Meeting Papers 159, Society for Economic Dynamics.
- Rubinstein, Ariel & Wolinsky, Asher, 1985.
"Equilibrium in a Market with Sequential Bargaining,"
Econometric Society, vol. 53(5), pages 1133-50, September.
- Arial Rubinstein & Asher Wolinsky, 1985. "Equilibrium in a Market with Sequential Bargaining," Levine's Working Paper Archive 623, David K. Levine.
- Muhamet Yildiz, 2004. "Waiting to Persuade," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 223-248.
- Peter M. DeMarzo & Branko Uro, 2006. "Ownership Dynamics and Asset Pricing with a Large Shareholder," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 774-815, August.
- Jehiel, Philippe & Moldovanu, Benny, 1995. "Negative Externalities May Cause Delay in Negotiation," Econometrica, Econometric Society, vol. 63(6), pages 1321-35, November.
- Nancy L. Stokey, 1981. "Rational Expectations and Durable Goods Pricing," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 112-128, Spring.
- Robert Evans, 1989. "Sequential Bargaining with Correlated Values," Review of Economic Studies, Oxford University Press, vol. 56(4), pages 499-510.
- Kalyan Chatterjee & Larry Samuelson, 1987. "Bargaining with Two-sided Incomplete Information: An Infinite Horizon Model with Alternating Offers," Review of Economic Studies, Oxford University Press, vol. 54(2), pages 175-192.
When requesting a correction, please mention this item's handle: RePEc:red:sed007:186. 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: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.