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Commitment through Incomplete Information in a Simple Repeated Bargaining Game

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  • Schmidt Klaus M.

Abstract

This paper analyzes a finitely repeated bargaining game with asymmetric information. It gives a tight characterization of the equilibrium path and the equilibrium payoffs of all sequential equilibria satisfying a weak Markov property. The method used allows for arbitrarily many different types and provides an intuitive understanding of how \"reputation\" works. It is shown that the seller can use the incomplete information about his costs to credibly threaten never to accept a price lower than his highest possible costs before the very end of the game. The result holds for any discount factor of the seller greater than 0.5. Journal of Economic LiteratureClassification Numbers: C78, D83.
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Suggested Citation

  • Schmidt Klaus M., 1993. "Commitment through Incomplete Information in a Simple Repeated Bargaining Game," Journal of Economic Theory, Elsevier, vol. 60(1), pages 114-139, June.
    • Handle: RePEc:eee:jetheo:v:60:y:1993:i:1:p:114-139
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    Cited by:

    1. Juan I. Beccuti, 2014. "Optimal Selling Mechanisms under Imperfect Commitment: Extending to the Multi-Period Case," Diskussionsschriften dp1402, Universitaet Bern, Departement Volkswirtschaft.
    2. Marina Bánnikova & José-Manuel Giménez-Gómez, 2022. "The Unanimity Rule under a Two-Agent Fixed Sequential Order Voting," Games, MDPI, vol. 13(6), pages 1-8, November.
    3. Fudenberg, Drew & Gao, Ying & Pei, Harry, 2022. "A reputation for honesty," Journal of Economic Theory, Elsevier, vol. 204(C).
    4. Darryl T. Banks & J. Wesley Hutchinson & Robert J. Meyer, 2002. "Reputation in Marketing Channels: Repeated-Transactions Bargaining with Two-Sided Uncertainty," Marketing Science, INFORMS, vol. 21(3), pages 251-272, December.
    5. Curtis Taylor & Liad Wagman, 2008. "Who Benefits From Online Privacy?," Working Papers 08-26, NET Institute.
    6. Quitz'e Valenzuela-Stookey, 2020. "Screening and Information-Sharing Externalities," Papers 2011.04013, arXiv.org.
    7. Jia, Kunhao & Liao, Xiuwu & Feng, Juan, 2018. "Selling or leasing? Dynamic pricing of software with upgrades," European Journal of Operational Research, Elsevier, vol. 266(3), pages 1044-1061.
    8. Jihong Lee & Qingmin Liu, 2008. "The Dynamics of Bargaining Postures: The Role of a Third Party," PIER Working Paper Archive 09-001, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    9. Zhang, Xubing & Jiang, Bo, 2014. "Increasing Price Transparency: Implications of Consumer Price Posting for Consumers' Haggling Behavior and a Seller's Pricing Strategies," Journal of Interactive Marketing, Elsevier, vol. 28(1), pages 68-85.
    10. Cripps, Martin W. & Dekel, Eddie & Pesendorfer, Wolfgang, 2005. "Reputation with equal discounting in repeated games with strictly conflicting interests," Journal of Economic Theory, Elsevier, vol. 121(2), pages 259-272, April.
    11. Devanur, Nikhil R. & Peres, Yuval & Sivan, Balasubramanian, 2019. "Perfect Bayesian Equilibria in repeated sales," Games and Economic Behavior, Elsevier, vol. 118(C), pages 570-588.
    12. Vincent Conitzer & Curtis R. Taylor & Liad Wagman, 2012. "Hide and Seek: Costly Consumer Privacy in a Market with Repeat Purchases," Marketing Science, INFORMS, vol. 31(2), pages 277-292, March.
    13. Yingkai Li & Harry Pei, 2020. "Equilibrium Behaviors in Repeated Games," Papers 2007.14002, arXiv.org, revised Feb 2021.
    14. Arieh Gavious & Ella Segev, 2017. "Price Discrimination Based on Buyers’ Purchase History," Dynamic Games and Applications, Springer, vol. 7(2), pages 229-265, June.
    15. Breig, Zachary, 2019. "Endogenous and exogenous commitment," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
    16. Patrick Hummel, 2018. "Reserve prices in repeated auctions," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(1), pages 273-299, March.
    17. Yonatan Gur & Gregory Macnamara & Daniela Saban, 2022. "Sequential Procurement with Contractual and Experimental Learning," Management Science, INFORMS, vol. 68(4), pages 2714-2731, April.
    18. Jihong Lee & Qingmin Liu, 2009. "Reputation and Repeated Bargaining with a Third Party," 2009 Meeting Papers 151, Society for Economic Dynamics.
    19. Kambe, Shinsuke, 1999. "Bargaining with Imperfect Commitment," Games and Economic Behavior, Elsevier, vol. 28(2), pages 217-237, August.
    20. Li, Yingkai & Pei, Harry, 2021. "Equilibrium behaviors in repeated games," Journal of Economic Theory, Elsevier, vol. 193(C).
    21. Breig, Zachary, 2022. "Repeated contracting without commitment," Journal of Economic Theory, Elsevier, vol. 204(C).
    22. Juan I. Beccuti, 2014. "Optimal Selling Mechanisms under Imperfect Commitment," Diskussionsschriften dp1401, Universitaet Bern, Departement Volkswirtschaft.

    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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