Neutral Bargaining in Financial Over-The-Counter Markets

Jin Yeub Kim

AEA Papers and Proceedings, 2019, vol. 109, 539-44

Abstract: I study bargaining over prices between two investors in financial over-the-counter markets with asymmetric information. I focus on environments in which an asset owner has private information about both her liquidity state and asset quality, and so a buyer is uncertain about the owner's true motive for selling—whether it is because of a liquidity need or because of a low asset valuation. I apply the concept of neutral bargaining solution to characterize the prices at which the investors trade with each other. I illustrate the implications for asset prices in over-the-counter markets where private information may be prevalent.

JEL-codes: C78 D82 G12 G14 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/pandp.20191100
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Citations: View citations in EconPapers (2)

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