Bargaining with Uncertain Value Distributions
AbstractThis paper studies a bargaining model in which the seller is uncertain about which distribution the buyer's values are drawn from. The distribution of the buyer's values is fixed across periods, while the buyerâ€™s values are drawn independently from the distribution each period. In the classical model of repeated bargaining where the buyerâ€™s value is drawn from a commonly known distribution and fixed across periods, the high-value buyer has a strong incentive to conceal his value, and the seller loses most of her bargaining power. An important question is whether adding a layer of uncertainty makes the high-value buyer more willing to accept high-price offers and improves the sellerâ€™s revenue. We find this to be the case as long as the sellerâ€™s ex ante beliefs are sufficiently optimistic.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Concordia University, Department of Economics in its series Working Papers with number 08005.
Length: 29 pages
Date of creation: Jul 2008
Date of revision: Dec 2009
Repeated Bargaining; Uncertain Value Distributions; Revenue Comparison; Learning;
Other versions of this item:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hart, Oliver D & Tirole, Jean, 1988.
"Contract Renegotiation and Coasian Dynamics,"
Review of Economic Studies,
Wiley Blackwell, vol. 55(4), pages 509-40, October.
- Kennan, John, 2001.
"Repeated Bargaining with Persistent Private Information,"
Review of Economic Studies,
Wiley Blackwell, vol. 68(4), pages 719-55, October.
- Biehl, Andrew R, 2001. "Durable-Goods Monopoly with Stochastic Values," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 565-77, Autumn.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414.
- Larry M. Ausubel & Raymond J. Deneckere, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Levine's Working Paper Archive 201, David K. Levine.
- Fudenberg, Drew & Tirole, Jean, 1983. "Sequential Bargaining with Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 50(2), pages 221-47, April.
- Ausubel, Lawrence M & Deneckere, Raymond J, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Econometrica, Econometric Society, vol. 57(3), pages 511-31, May.
- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
- Marco Battaglini, 2003.
"Long-Term Contracting with Markovian Consumers,"
Theory workshop papers
505798000000000048, UCLA Department of Economics.
- Oksana Loginova & Curtis Taylor, 2008.
"Price experimentation with strategic buyers,"
Review of Economic Design,
Springer, vol. 12(3), pages 165-187, September.
- Oksana Loginova & Curtis R. Taylor, 2005. "Price Experimentation with Strategic Buyers," Working Papers 0509, Department of Economics, University of Missouri.
- Loginova, Oksana & Taylor, Curtis, 2003. "Price Experimentation with Strategic Buyers," Working Papers 03-02, Duke University, Department of Economics.
- Lemke, Robert J., 2004. "Dynamic bargaining with action-dependent valuations," Journal of Economic Dynamics and Control, Elsevier, vol. 28(9), pages 1847-1875, July.
- Sobel, Joel, 1991. "Durable Goods Monopoly with Entry of New Consumers," Econometrica, Econometric Society, vol. 59(5), pages 1455-85, September.
- Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986.
"Foundations of dynamic monopoly and the coase conjecture,"
Journal of Economic Theory,
Elsevier, vol. 39(1), pages 155-190, June.
- Faruk Gul & Hugo Sonnenschein & Robert Wilson, 2010. "Foundations of Dynamic Monopoly and the Coase Conjecture," Levine's Working Paper Archive 232, David K. Levine.
- Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
- Banks, Jeffrey S & Sobel, Joel, 1987.
"Equilibrium Selection in Signaling Games,"
Econometric Society, vol. 55(3), pages 647-61, May.
- Andreas Blume, 1998. "Contract Renegotiation with Time-Varying Valuations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(3), pages 397-433, 09.
- Cho, In-Koo & Sobel, Joel, 1990. "Strategic stability and uniqueness in signaling games," Journal of Economic Theory, Elsevier, vol. 50(2), pages 381-413, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Economics Department).
If references are entirely missing, you can add them using this form.