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On the Strategic Disclosure of Feasible Options in Bargaining

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  • de Clippel, Geoffroy
  • Eliaz, Kfir

Abstract

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 first need to identify the set of feasible outcomes before they bargain over which of them is selected. Our objective is to understand how different bargaining institutions affect the incentives to disclose possible solutions to the bargaining problem, where inefficiency may arise when both parties withold Pareto superior options. We take a first step in this direction by proposing a simple, stylized model that captures the idea that bargainers may strategically withhold information 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 identifies 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 Raiffa'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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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8262.

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Date of creation: Feb 2011
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Handle: RePEc:cpr:ceprdp:8262

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Keywords: Bargaining; Disclosure;

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References

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  1. Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, vol. 68(1), pages 135-148, January.
  2. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  3. Nicola Persico, 2004. "Committee Design with Endogenous Information," Review of Economic Studies, 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, 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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