Uninformed Seller Research Articles

Multi-period bargaining: asymmetric information and risk aversion

A two period bargaining model with asymmetric information is considered. An uninformed seller charges a uniform price to two buyers. A risk averse seller offers a larger price cut in period two when one buyer remains in the market than when two buyers remain. The price in period one is sensitive to the number of buyers and the seller’s degree of risk aversion. The initial price charged to a single buyer may be higher or lower than the price charged to two buyers, depending on the degree of seller risk aversion.

Revisiting the Lemons Market

This article extends the standard competitive adverse selection model by allowing for qualitatively different information structures of agents on the informed side of the market. Using the stylized framework of the market for used cars, we examine the welfare properties of equilibria under the assumption that a fraction of the sellers remains uninformed about a parameter that is relevant for their own transaction. Whether market performance increases or decreases in the number of uninformed sellers is shown to depend on (1) the potential gains from trade in the market and (2) the average quality of the sellers' information structure.

Private information, risk aversion, and the evolution of market research

On a homogeneous oligopoly market informed sellers are fully aware of market demand whereas uninformed sellers only know the distribution. We first derive the market results when sellers are risk averse, similarly to Ponssard (1979) who assumed risk neutrality throughout. With the help of these results evolutionary processes are formulated according to which sellers can switch to market research or refrain from it depending on the difference in profits of informed and uninformed sellers. We derive the evolutionarily stable number of informed sellers and discuss how it is influenced by market parameters.

Reputation in Bargaining and Durable Goods Monopoly

This paper analyzes durable goods monopoly in an infinite-horizon, discrete-time game. We prove that, as the time interval between successive offers approaches zero, all seller payoffs between zero and static monopoly profits are supported by subgame perfect equilibria. This reverses a well-known conjecture of Coase. Alternatively, one can interpret the model as a sequential bargaining game with one-sided incomplete information in which an uninformed seller makes all the offers. Our folk theorem for seller payoffs equally applies to the set of sequential equilibria of this bargaining game.