Friday, February 2, 2018 at 11:40am to 1:10pm
Ives Hall, 115
B07 Tower Rd, Ithaca, NY 14853, USA
Isaias Chaves Villamizar - Stanford University
Abstract: I study the role of privacy in bargaining. A seller makes offers every instant, without commitment, to a privately informed buyer. There are potential competing buyers who observe the negotiation and can choose to enter, triggering a bidding war. When the skimming of buyer types is good news for entrants, hiding offers from them uniformly raises transaction prices and slows down trade. It makes high-valuation buyers worse off. It typically makes the seller better off. Having the ability to lure in competition by making public offers can therefore hurt the seller when she cannot commit to future prices. More generally, I show that the effects of privacy mainly depend on whether the skimming of buyer types encourages or discourages entry. Regardless of the effect of skimming on entry, when the offers are private, trade happens in dribs and drabs only, with the seller screening buyers one by one, whereas when offers are public, the equilibrium can alternate between bursts of trade, when a positive mass of buyer types accepts in an instant, and dribs and drabs of trade.