Career Concerns of Bargainers

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Career Concerns of Bargainers

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John Fingleton

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Michael Raith

Abstract

This article studies strategic bargaining in which a seller and a buyer are each represented by an agent. Potential agents differ in their ability to obtain information about the other party's reservation price; neither principal knows the other's reservation price or her agent's type. Agents are motivated by career concerns; they want to be perceived as skilled bargainers by their principals. In equilibrium, skilled agents use their private information optimally, while unskilled agents randomize between aggressive and soft price bids, attempting to imitate skilled types. We compare "open-door" bargaining, in which principals can observe the entire bargaining game as well as its outcome, with "closed-door" bargaining, in which they observe only the outcome. We show that agents unambiguously bargain more aggressively with open doors than behind closed doors, which leads to a less efficient bargaining outcome. Their principals may therefore prefer to let their agents bargain behind closed doors. Copyright 2005, Oxford University Press.

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Article provided by Oxford University Press in its journal The Journal of Law, Economics, and Organization.

Volume (Year): 21 (2005)
Issue (Month): 1 (April)
Pages: 179-204
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Handle: RePEc:oup:jleorg:v:21:y:2005:i:1:p:179-204

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Prat, Andrea, 2003. "The Wrong Kind of Transparency," CEPR Discussion Papers 3859, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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- Andrea Prat, 2005. "The Wrong Kind of Transparency," American Economic Review, American Economic Association, vol. 95(3), pages 862-877, June. [Downloadable!]
Otto H. Swank & Bauke Visser, 2007. "Is Transparency to no avail? Committee Decision-making, Pre-meetings, and Credible Deals," Tinbergen Institute Discussion Papers 07-055/1, Tinbergen Institute. [Downloadable!]
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Alexander Koch & Eloïc Peyrache, 2008. "Mixed up? that’s good for motivation," Economic Theory, Springer, vol. 34(1), pages 107-125, January. [Downloadable!] (restricted)
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- Alexander K. Koch & Eloic Peyrache, 2004. "Mixed up? That's good for motivation," Royal Holloway, University of London: Discussion Papers in Economics 04/22, Department of Economics, Royal Holloway University of London, revised Sep 2004. [Downloadable!]
Gersbach, Hans & Hahn, Volker, 2008. "Information Acquisition and Transparency in Committees," CEPR Discussion Papers 6677, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Oliver Gürtler, 2006. "Implicit Contracts: Two Different Approaches," Discussion Papers 110, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]

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