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Commitment through Incomplete Information in a Simple Repeated Bargaining Model

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Author Info

  • Klaus M. Schmidt

Abstract

The paper analyzes a finitely repeated bargaining game with asymmetric information. It gives a precise 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. This result is independent of the discount factors of the two players.

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Bibliographic Info

Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 303.

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Date of creation: Jul 1990
Date of revision:
Handle: RePEc:bon:bonsfa:303

Contact details of provider:
Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

Related research

Keywords: Bargaining; Commitment; Repeated Games; Reputation;

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Cited by:
  1. David K. Levine, 1996. "Reputation and Distribution in a Gift Giving Game," Levine's Working Paper Archive 2022, David K. Levine.
  2. Schmidt,Klaus M., 1991. "Reputation and equilibrium characterization in repeated games of conflicting interests," Discussion Paper Serie A 333, University of Bonn, Germany.

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