This 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 buyer's values are drawn independently from the distribution each period. In the classical model of repeated bargaining where the buyer'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 seller's revenue. We find this to be the case as long as the seller's ex ante beliefs are sufficiently optimistic.
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Paper provided by Concordia University, Department of Economics in its series Working Papers with number
08005.
Find related papers by JEL classification: 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
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