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On the Strategic Disclosure of Feasible Options in Bargaining

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Most of the economic literature on bargaining has focused on situations where the set of possible outcomes is taken as given. This paper is concerned with situations where decision-makers rst need to identify the set of feasible outcomes before they bargain over which of them is selected. Our objective is to understand how di er- ent bargaining institutions a ect the incentives to disclose possible solutions to the bargaining problem, where ineciency may arise when both parties withold Pareto superior options. We take a rst step in this direction by proposing a simple, stylized model that captures the idea that bargainers may strategically withhold informa- tion regarding the existence of feasible alternatives that are Pareto superior. We characterize a partial ordering of \regular" bargaining solutions (i.e., those belonging to some class of \natural" solutions) according to the likelihood of disclosure that they induce. This ordering identi es the best solution in this class, which favors the \weaker" bargainer subject to the regularity constraints. We also illustrate our result in a simple environment where the best solution coincides with Nash, and where the Kalai-Smorodinsky solution is ranked above Rai a's simple coin-toss solution. The analysis is extended to a dynamic setting in which the bargainers can choose the timing of disclosure.

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Paper provided by Brown University, Department of Economics in its series Working Papers with number 2011-5.

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Date of creation: 2011
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Handle: RePEc:bro:econwp:2011-5

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Postal: Department of Economics, Brown University, Providence, RI 02912

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  1. Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, Econometric Society, vol. 68(1), pages 135-148, January.
  2. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, Econometric Society, vol. 18(2), pages 155-162, April.
  3. Nicola Persico, 2004. "Committee Design with Endogenous Information," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 71(1), pages 165-191, 01.
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Cited by:
  1. Yuan Ju, 2013. "Efficiency and compromise: a bid-offer–counteroffer mechanism with two players," International Journal of Game Theory, Springer, Springer, vol. 42(2), pages 501-520, May.
  2. Yuet-Yee Wong & Randall Wright, 2011. "Buyers, Sellers and Middlemen: Variations on Search-Theoretic Themes," NBER Working Papers 17511, National Bureau of Economic Research, Inc.

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