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Mediation: incomplete information bargaining with filtered communication

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  • Jarque, Xavier
  • Ponsati, Clara
  • Sakovics, Jozsef

Abstract

We analyze a continuous-time bilateral double auction in the presence of two-sided incomplete information and a smallest money unit. A distinguishing feature of our model is that intermediate concessions are not observable by the adversary: they are only communicated to a passive auctioneer. An alternative interpretation is that of mediated bargaining. We show that an equilibrium using only the extreme agreements always exists and display the necessary and sucient condition for the existence of (perfect Bayesian) equilibra which yield intermediate agreements. For the symmetric case with uniform type distribution we numerically calculate the equilibria. We find that the equilibrium which does not use compromise agreements is the least ecient, however, the rest of the equilibria yield the lower social welfare the higher number of compromise agreements are used.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 39 (2003)
Issue (Month): 7 (September)
Pages: 803-830

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Handle: RePEc:eee:mateco:v:39:y:2003:i:7:p:803-830

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Web page: http://www.elsevier.com/locate/jmateco

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References

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  1. Erik van Damme & Reinhard Selten & Eyal Winter, 1989. "Alternating Bid Bargaining with a Smallest Money Unit," Discussion Paper Serie A 253, University of Bonn, Germany.
  2. Watson, Joel, 1998. "Alternating-Offer Bargaining with Two-Sided Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 65(3), pages 573-94, July.
  3. Ausubel, Lawrence M. & Cramton, Peter & Deneckere, Raymond J., 2002. "Bargaining with incomplete information," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 3, chapter 50, pages 1897-1945 Elsevier.
  4. Cho, In-Koo, 1990. "Uncertainty and Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 57(4), pages 575-95, October.
  5. Peter Cramton, 1984. "Bargaining with Incomplete Information: An Infinite-Horizon Model with Two-Sided Uncertainty," Papers of Peter Cramton 84res, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
  6. Broman, Elizabeth M., 1989. "The bilateral monopoly model: Approaching certainty under the split-the-difference mechanism," Journal of Economic Theory, Elsevier, vol. 48(1), pages 134-151, June.
  7. Ponsati, Clara & Sakovics, Jozsef, 1995. "The war of attrition with incomplete information," Mathematical Social Sciences, Elsevier, vol. 29(3), pages 239-254, June.
  8. Ausubel, Lawrence M & Deneckere, Raymond J, 1992. "Bargaining and the Right to Remain Silent," Econometrica, Econometric Society, vol. 60(3), pages 597-625, May.
  9. Fudenberg, Drew & Tirole, Jean, 1983. "Sequential Bargaining with Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 50(2), pages 221-47, April.
  10. Gresik, Thomas A., 1996. "Incentive-Efficient Equilibria of Two-Party Sealed-Bid Bargaining Games," Journal of Economic Theory, Elsevier, vol. 68(1), pages 26-48, January.
  11. Ausubel, Lawrence M & Deneckere, Raymond J, 1993. "Efficient Sequential Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 435-61, April.
  12. Clara PONSATI-OBIOLS, 1992. "Unique Equilibrium in a Model of Bargaining over Many Issues," Annales d'Economie et de Statistique, ENSAE, issue 25-26, pages 81-100.
  13. D. Abreu & F. Gul, 1998. "Bargaining and Reputation," Princeton Economic Theory Papers 00s9, Economics Department, Princeton University.
  14. Satterthwaite, Mark A. & Williams, Steven R., 1989. "Bilateral trade with the sealed bid k-double auction: Existence and efficiency," Journal of Economic Theory, Elsevier, vol. 48(1), pages 107-133, June.
  15. Peter Cramton, 1992. "Strategic Delay in Bargaining with Two-Sided Uncertainty," Papers of Peter Cramton 92res, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
  16. Sakovics Jozsef, 1993. "Delay in Bargaining Games with Complete Information," Journal of Economic Theory, Elsevier, vol. 59(1), pages 78-95, February.
  17. Admati, Anat R & Perry, Motty, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 345-64, July.
  18. Ausubel, Lawrence M & Deneckere, Raymond J, 1992. "Durable Goods Monopoly with Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 795-812, October.
  19. Leininger, W. & Linhart, P. B. & Radner, R., 1989. "Equilibria of the sealed-bid mechanism for bargaining with incomplete information," Journal of Economic Theory, Elsevier, vol. 48(1), pages 63-106, June.
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Citations

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Cited by:
  1. Johannes Hörner & Nicolas Sahuguet, 2011. "A war of attrition with endogenous effort levels," Economic Theory, Springer, vol. 47(1), pages 1-27, May.
  2. Heifetz, Aviad & Segev, Ella, 2005. "Escalation and delay in protracted international conflicts," Mathematical Social Sciences, Elsevier, vol. 49(1), pages 17-37, January.
  3. Vida, Péter & Azacis, Helmuts, 2012. "A Detail-Free Mediator," Cardiff Economics Working Papers E2012/10, Cardiff University, Cardiff Business School, Economics Section.
  4. Damiano, Ettore & Li, Hao & Suen, Wing, 2012. "Optimal deadlines for agreements," Theoretical Economics, Econometric Society, vol. 7(2), May.
  5. CAMINA, Ester & PORTEIRO, Nicolas, 2004. "The role of mediation in peacemaking and peacekeeping negotiations," CORE Discussion Papers 2004005, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Langlois Catherine C & Langlois Jean-Pierre P., 2010. "Costly Interference: A Game Theoretic Analysis of Sanctions," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 16(1), pages 1-34, June.

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