Commitment Through Incomplete Information in a Simple Repeated Bargaining Model
AbstractThe 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 InfoPaper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Theoretical Economics Paper Series with number 200.
Date of creation: 1989
Date of revision:
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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp
Other versions of this item:
- Klaus M. Schmidt, 1990. "Commitment through Incomplete Information in a Simple Repeated Bargaining Model," Discussion Paper Serie A 303, University of Bonn, Germany.
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- Schmidt,Klaus M., 1991.
"Reputation and equilibrium characterization in repeated games of conflicting interests,"
Discussion Paper Serie A
333, University of Bonn, Germany.
- K. Schmidt, 1999. "Reputation and Equilibrium Characterization in Repeated Games of Conflicting Interests," Levine's Working Paper Archive 626, David K. Levine.
- David K. Levine, 1996. "Reputation and Distribution in a Gift Giving Game," Levine's Working Paper Archive 2022, David K. Levine.
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