Transparency and price formation

Artikel

We study the role that price transparency plays in determining the efficiency and surplus division in a sequential bargaining model of price formation with asymmetric information. Under natural assumptions on type distributions, and for any discount factor, we show that the unobservability of past negotiations leads to lower prices and faster trading. Unobservability therefore enhances the ``Coasian effect" by fostering efficiency and diverting more of the surplus to the player who possesses private information. In addition, we show that the equilibrium is unique and is in pure strategies in the non-transparent regime; this stands in sharp contrast to the existing literature and allows for a better understanding of the Coasian effect and price observability.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Theoretical Economics ; ISSN: 1555-7561 ; Volume: 10 ; Year: 2015 ; Issue: 2 ; Pages: 341-383 ; New Haven, CT: The Econometric Society

Classification and Topics

• Classification: Wirtschaft ; Optimization Techniques; Programming Models; Dynamic Analysis ; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games ; Bargaining Theory; Matching Theory
• Subject: Coase conjecture ; bargaining ; durable goods monopoly ; incomplete information ; price formation ; transparency

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kaya, Ayça ; Liu, Qingmin
• Event: Veröffentlichung
• (who): The Econometric Society
• (where): New Haven, CT
• (when): 2015

Further information

• DOI: doi:10.3982/TE1566
• Handle: http://hdl.handle.net/10419/150252
• Last update: 10.03.2025, 11:42 AM CET