Bilateral trading and incomplete information: Price convergence in a small market

Kalyan Chatterjee and Kaustav Das

Games and Economic Behavior, 2017, vol. 106, issue C, 89-113

Abstract: We study a model of decentralised bilateral interactions in a small market where one of the sellers has private information about her value. In addition to this seller with private information, there are two identical buyers and another seller, whose valuation is commonly known to be in between the two possible valuations of the seller with private information. We consider an infinite horizon game with simultaneous one-sided offers and simultaneous responses. We construct one particular PBE of the game and show that, as the discount factor goes to 1, prices in all transactions converge to the same value. We then show that this is the case with any stationary equilibrium of the game. That is, the asymptotic outcome is unique across all stationary equilibria.

Keywords: Bilateral bargaining; Incomplete information; Outside options; Coase conjecture (search for similar items in EconPapers)
JEL-codes: C78 D82 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0899825617301549
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:106:y:2017:i:c:p:89-113

DOI: 10.1016/j.geb.2017.09.006

Access Statistics for this article

Games and Economic Behavior is currently edited by E. Kalai

More articles in Games and Economic Behavior from Elsevier
Bibliographic data for series maintained by Catherine Liu ().