Valuation in Dynamic Bargaining Markets

45 Pages Posted: 3 Nov 2008  

Darrell Duffie

Stanford University

Nicolae Garleanu

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Lasse Heje Pedersen

AQR Capital Management, LLC; Copenhagen Business School - Department of Finance; New York University (NYU); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2001

Abstract

We study the impact on asset prices of illiquidity associated with search and bargaining in an economy in which agents can trade only when they find each other. Marketmakers' prices are higher and bid-ask spreads are lower if investors can find each other more easily. Prices become Walrasian as investors' or marketmakers' search intensities get large. Endogenizing search intensities yields natural welfare implications. Information can fail to be revealed through trading when search is difficult.

Suggested Citation

Duffie, Darrell and Garleanu, Nicolae and Pedersen, Lasse Heje, Valuation in Dynamic Bargaining Markets (September 2001). NYU Working Paper No. FIN-01-022. Available at SSRN: https://ssrn.com/abstract=1294490

Darrell Duffie (Contact Author)

Stanford University

Stanford, CA 94305
United States

Nicolae Bogdan Garleanu

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

HOME PAGE: http://faculty.haas.berkeley.edu/garleanu

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Lasse Heje Pedersen

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Copenhagen Business School - Department of Finance ( email )

Solbjerg Plads 3
Frederiksberg, DK-2000
Denmark

New York University (NYU) ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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