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Uncertainty about Uncertainty and Delay in Bargaining

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  • Yossi Feinberg
  • Andrzej Skrzypacz

Abstract

We study a one-sided offers bargaining game in which the buyer has private information about the value of the object and the seller has private information about his beliefs about the buyer's valuation. We show that this uncertainty about uncertainties dramatically changes the set of outcomes. In particular, second order beliefs can lead to a delay in reaching agreement even when the seller makes frequent offers. We show that not all types of second order beliefs lead to a delay. When the buyer assigns positive probability to the seller knowing the buyer's value, then delay not only can occur, but it must occur for a class of equilibria. However, in all other cases delay will never occur. Copyright The Econometric Society 2005.

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File URL: http://hdl.handle.net/10.1111/j.1468-0262.2005.00565.x
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Bibliographic Info

Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 73 (2005)
Issue (Month): 1 (01)
Pages: 69-91

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Handle: RePEc:ecm:emetrp:v:73:y:2005:i:1:p:69-91

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Citations

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Cited by:
  1. Jonathan Weinstein & Muhamet Yildiz, 2004. "Finite-Order Implications of Any Equilibrium," Levine's Working Paper Archive 122247000000000065, David K. Levine.
  2. Stephen Morris & Hanming Fang, 2004. "Multidimensional Private Value Auctions," Yale School of Management Working Papers ysm387, Yale School of Management.
  3. Juan Vidal-Puga, 2005. "Reinterpreting the meaning of breakdown," Game Theory and Information 0501004, EconWPA.
  4. Rong, Kang, 2013. "Impact of second-order uncertainty on the efficiency of the 0.5-double auction," Mathematical Social Sciences, Elsevier, vol. 65(1), pages 67-71.
  5. Dang, Tri Vi, 2008. "Bargaining with endogenous information," Journal of Economic Theory, Elsevier, vol. 140(1), pages 339-354, May.
  6. Muhamet Yildiz & Jonathan Weinsten, 2004. "Impact of higher-order uncertainty," Econometric Society 2004 North American Winter Meetings 157, Econometric Society.
  7. Plambeck, Erica L. & Taylor, Terry A., 2004. "Implications of Breach Remedy and Renegotiation for Design of Supply Contracts," Research Papers 1888, Stanford University, Graduate School of Business.
  8. Juan Vidal-Puga, 2008. "Delay in the alternating-offers model of bargaining," International Journal of Game Theory, Springer, vol. 37(4), pages 457-474, December.
  9. Srihari Govindan & Robert Wilson, 2009. "On Forward Induction," Econometrica, Econometric Society, vol. 77(1), pages 1-28, 01.
  10. Ortner, Juan, 2013. "Optimism, delay and (in)efficiency in a stochastic model of bargaining," Games and Economic Behavior, Elsevier, vol. 77(1), pages 352-366.
  11. In-Koo Cho, 2007. "Perishable Durable Goods," Economics Working Papers 0077, Institute for Advanced Study, School of Social Science.
  12. Leonardo Rezende & In-Koo Cho, 2007. "Perishable Durable Goods," 2007 Meeting Papers 453, Society for Economic Dynamics.
  13. Li, Ming, 2002. "Information collection in bargaining," MPRA Paper 11108, University Library of Munich, Germany, revised Mar 2007.

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