Inefficient Prebargaining Search
AbstractWe identify conditions under which a bargainer makes inefficiently large (small) investments in a search for information about the opponent's reservation price. The analysis starts with the observation that a player will invest too much (too little) if the opponent's expected payoff is decreasing (increasing) in the probability that the player gets information. We develop comparative-static results about over- and underinvestment as a function of the efficiency and distributional properties of mechanisms, their dependence on search outcomes, and the nature of the trading problem. The results do not depend on any specific bargaining mechanism and are illustrated in several examples.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 168 (2012)
Issue (Month): 2 (June)
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Web page: http://www.mohr.de/jite
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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