Gradual Bargaining in Decentralized Asset Markets

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

doi:10.1016/j.red.2020.10.008

Gradual Bargaining in Decentralized Asset Markets  

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

^*Corresponding author for this work

School of Economics

Research output: Contribution to journal › Article (Academic Journal) › peer-review

10 Citations (Scopus)

135 Downloads (Pure)

Abstract

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 language	English
Pages (from-to)	72-109
Number of pages	38
Journal	Review of Economic Dynamics
Volume	42
Early online date	15 Oct 2020
DOIs	https://doi.org/10.1016/j.red.2020.10.008
Publication status	Published - 1 Oct 2021

Bibliographical note

provisional acceptance date added, based on record creation.

Keywords

Decentralized asset markets
Bargaining with an agenda
Nash program

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10.1016/j.red.2020.10.008

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title = "Gradual Bargaining in Decentralized Asset Markets  ",

abstract = "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.",

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author = "Guillaume Rocheteau and Tai-Wei Hu and Lucie Lebeau and Younghwan In",

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AU - Rocheteau, Guillaume

AU - Hu, Tai-Wei

AU - Lebeau, Lucie

AU - In, Younghwan

N1 - provisional acceptance date added, based on record creation.

PY - 2021/10/1

Y1 - 2021/10/1

N2 - 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.

AB - 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.

KW - Decentralized asset markets

KW - Bargaining with an agenda

KW - Nash program

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DO - 10.1016/j.red.2020.10.008

M3 - Article (Academic Journal)

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VL - 42

SP - 72

EP - 109

JO - Review of Economic Dynamics

JF - Review of Economic Dynamics

ER -

Gradual Bargaining in Decentralized Asset Markets

Abstract

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Keywords

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Gradual Bargaining in Decentralized Asset Markets  