This proposal develops new theoretical tools to study price negotiations in dynamic markets. The focus is on one of the most primitive economic problems: a seller and a buyer bargain over the price of a good. Their cost and values are private information and, if they do not reach an agreement today, they may continue bargaining tomorrow.

Somewhat surprisingly, our knowledge about bargaining with two-sided asymmetric information is still quite limited. An important reason for this lack of knowledge is the lack of theoretical tools to properly analyze the theoretical models involving multiple competing forces. Intuitively, on the one hand, signaling forces induce the seller and the buyer to delay trade to obtain a higher share of the trade surplus. On the other hand, Coasian forces push prices down and make trade efficient. The balance between these two forces determines the efficiency of the market and how the trade surplus is shared between the seller and the buyer.

The main goal is to provide a new systematic analysis of markets with asymmetric information. The first aim is to develop new stability-based equilibrium concepts and the tools to use them in practice. The second aim is to use these tools to analyze simpler, yet not fully understood, settings and gain an understanding of their properties and use. The third aim is to expand dynamic pricing by privately informed sellers in different markets: Markets with independent and interdependent values, where traders transact once or multiple times. The final aim is to combine the tools and the knowledge of the bargaining markets to analyze bargaining with two-sided asymmetric information. Markets studied in this project include real estate markets, markets for durable goods, markets for intermediate goods, and financial markets. The results will provide guidance to assess the effect of currently debated privacy or confidentiality policies on social welfare or market efficiency.