AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Neutral Bargaining in Financial Over-The-Counter Markets
AEA Papers and Proceedings
vol. 109,
May 2019
(pp. 539–44)
Abstract
I study bargaining over prices between two investors in financial over-the-counter markets with asymmetric information. I focus on environments in which an asset owner has private information about both her liquidity state and asset quality, and so a buyer is uncertain about the owner's true motive for selling—whether it is because of a liquidity need or because of a low asset valuation. I apply the concept of neutral bargaining solution to characterize the prices at which the investors trade with each other. I illustrate the implications for asset prices in over-the-counter markets where private information may be prevalent.Citation
Kim, Jin Yeub. 2019. "Neutral Bargaining in Financial Over-The-Counter Markets." AEA Papers and Proceedings, 109: 539–44. DOI: 10.1257/pandp.20191100Additional Materials
JEL Classification
- C78 Bargaining Theory; Matching Theory
- D82 Asymmetric and Private Information; Mechanism Design
- G12 Asset Pricing; Trading volume; Bond Interest Rates
- G14 Information and Market Efficiency; Event Studies; Insider Trading