Repeated Bargaining with Persistent Private Information

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Repeated Bargaining with Persistent Private Information

Author Info

Kennan, J.

Additional information is available for the following registered author(s):

John Kennan

Abstract

The paper analyzes repeated contract negotiations involving the same buyer and seller where the contracts are linked because the buyer has persistent (but not fully permanent) private information. (The main application is labor contracts, where the employer has private information about the value of labor services sold by the union). The size of the surplus being divided is specified as a two-state Markov chain with transitions that are synchronized with contract negotiation dates. Equilibrium involves information cycles triggered by the success or failure of aggressive demands made by the seller. The main result characterizes a class of cyclic weak-Markov-Perfect equilibria.

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Publisher Info
Paper provided by Wisconsin Madison - Social Systems in its series Working papers with number 9708.

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Length: 45 pages
Date of creation: 1997
Date of revision:
Handle: RePEc:att:wimass:9708

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Postal: UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.

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Related research
Keywords: INFORMATION ; CONTRACTS;

Other versions of this item:

Article
- Kennan, John, 2001. "Repeated Bargaining with Persistent Private Information," Review of Economic Studies, Blackwell Publishing, vol. 68(4), pages 719-55, October.

Find related papers by JEL classification:
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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Battaglini, Marco, 2005. "Optimality and Renegotiation in Dynamic Contracting," CEPR Discussion Papers 5014, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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- Susan Athey & Kyle Bagwell, 2008. "Collusion With Persistent Cost Shocks," Econometrica, Econometric Society, vol. 76(3), pages 493-540, 05. [Downloadable!] (restricted)

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