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.
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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
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