New paper by Dino Gerardi and Ignacio Monzón to appear in the American Economic Review
We congratulate Dino Gerardi (Carlo Alberto Chair) and Ignacio Monzón (Carlo Alberto Junior Chair) on their paper “Bargaining over a Divisible Good in the Market for Lemons“, which will appear in the American Economic Review, one of the top and most established journals in economics.
In their paper, which is joint work with Lucas Maestri, they study bargaining of divisible assets (like financial assets or stocks). There is a large literature in economics that studies bargaining of indivisible assets. However, assets are divisible in many real-world settings. Dino, Lucas and Ignacio show how divisibility introduces a new form of competition between the buyer’s present and future selves. This competition is detrimental to the buyer. Moreover, the pattern of trade of divisible assets is different from that of indivisible ones. When the asset is divisible, high-quality assets are traded smoothly over time. Instead, low-quality assets are traded smoothly for a while and then the whole remaining fraction of the asset is traded at once.