Incomplete Information Bargaining with Outside Opportunities
AbstractWe consider two kinds of Ã¢â¬Ëoutside opportunityÃ¢â¬â¢ that a seller of an indivisible good might have: selling to a different buyer and consuming the good herself. In both models the seller is uncertain about the buyer's valuation, and becomes more pessimistic over time. When the seller becomes sufficiently pessimistic, she prefers the outside opportunity, so she will not bargain indefinitely with the current buyer. Despite the resulting finite-horizon nature of negotiations, the link between the buyer's willingness to accept an offer and the seller's eagerness to go "outside" generates multiple equilibria.
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Bibliographic InfoPaper provided by David K. Levine in its series Levine's Working Paper Archive with number 229.
Date of creation: 01 Jan 1987
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Other versions of this item:
- Fudenberg, Drew & Levine, David K & Tirole, Jean, 1987. "Incomplete Information Bargaining with Outside Opportunities," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 37-50, February.
- Tirole, Jean & Levine, David & Fudenberg, Drew, 1987. "Incomplete Information Bargaining with Outside Opportunities," Scholarly Articles 3196301, Harvard University Department of Economics.
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