Private Stone Gambling With Agents’ Heterogeneous Risk Preferences

Stone Gambling has a long history, and nowadays the Stone Gambling market is very prosperous. However, as a kind of trading, Stone Gambling did not cause too much attention of scholars. This may be due to the domestic and foreign scholars’less acquaintance of Stone Gambling, therefore, few existing researches. In fact, Stone Gambling can be roughly divided into three categories, such as the Single Unit Auction of Public Stone Gambling (referred to as Single-side auctions), Double-side Auction of Public Stone Gambling and Bargaining of Private Stone Gambling.The most famous Single Unit Auction of Public Stone Gambling is Myanmar Public Auction, which is organized by Myanmar government. And Myanmar Public Auction can be seen as Common Value Auction. Therefore, the Single Unit Auction of Public Stone Gambling also has problems in traditional Common Value Auction, such as winner curse, public information and so on. In China, there are many stone marks traded in the way of Double-side Auction, which is supported by local governments and attended by various stone trading companies. Therefore, the number of sellers and buyers in Double-side Auction is not one, which constitutes a "many-to-many" structure. This article summarizes this kind of stone gambling market into Double-side Auction of Public Stone Gambling. And Double-side Auction can be divided into two forms, namely Continuous Auction (also known as Continuous Double Auction) and Call Auction. Existing researches about Double-side Auction are focused on bidding strategy. In addition, unlike the first two stone gambling, the main characteristics of Bargaining of Private Stone Gambling are one seller, one buyer and one subject matter. In the process of Bargaining, the two sides tentatively give their offers, then the transaction cannot be carried out if the seller’s minimum offer is higher than the highest offer of the buyer, otherwise, the two sides can further clarify the offer. The focus of this study is the Bargaining of Private Stone Gambling, taking risk preferences of traders as the entry point, based on the concept of common value, trying to explain some special phenomenon. And there are four of the more important issues, the reasons about different degree of risk, the efficiency, the risk control and revealing and adverse selection problem.Actually, the reasons about different degree of risk are two, one is the compound gambling behavior of seller, and the other is the seller trying to maximize revenue by product differentiation countermeasures. In addition, in the analysis of adverse selection problem of the Bargaining of Private Stone Gambling, the choice of temporarily exiting the market can also be seen as another explanation. Speaking of efficiency problem, involving risk preference factors, the considerations of the sellers are not only about income, but through the comparison of expected utility. The bright stone gambling and complete stone gambling, these two extremes transactions are efficient, and there is no inefficiency phenomenon. However, taking into account the transaction costs, it is possible that the efficiency of complete stone gambling is greater than the efficiency of the bright stone gambling. This is because the transaction costs cause the deadweight loss of efficiency. However, in the face of risk in stone gambling, traders can use four methods to control the risk, risk avoidance, risk sharing, risk transference and incision option. Incision option is a method to control the risk in Bargaining, which is inspired from Option. But the adverse selection problem is different from the traditional Lemons Market. The sellers in the Private Stone Gambling Market, who are unable to trade, are not completely out of the market, but can choose to temporarily withdraw from the market. So they can enter the market once again in another form by making some change of their stones. Thus, there is no problem of adverse selection in Private Stone Gambling Market, and this market is characterized by different degree of risk. However, the adverse selection problem is not the only problem in Private Stone Gambling Market, bidding strategy may also make deals cannot be reached.We all know that the most fundamental value of the analysis and summary of economic laws is the guiding role of real economic activity. Finally, the extension and application of Bargaining, this article discusses the issue about earthquake insurance pricing in insurance company.