Gradual Bargaining in Decentralized Asset Markets  

Guillaume Rocheteau, Tai-Wei Hu, Lucie Lebeau, Younghwan In

Research output: Contribution to journalArticle (Academic Journal)


We introduce a new approach to bargaining, with strategic and axiomatic foundations, into models of decentralized asset markets. According to this approach, which
encompasses the Nash (1950) solution as a special case, bilateral negotiations follow an agenda that partitions assets into bundles to be sold sequentially. We construct two
alternating-offer games consistent with this approach and characterize their subgame perfect equilibria. We show the revenue of the asset owner is maximized when assets
are sold one infinitesimal unit at a time. In a general equilibrium model with endogenous asset holdings, gradual bargaining reduces asset misallocation and prevents
market breakdowns.
Original languageEnglish
JournalReview of Economic Dynamics
Publication statusAccepted/In press - 12 Oct 2020

Bibliographical note

provisional acceptance date added, based on record creation.

Cite this

Rocheteau, G., Hu, T-W., Lebeau, L., & In, Y. (Accepted/In press). Gradual Bargaining in Decentralized Asset Markets  . Review of Economic Dynamics.