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Uncertainty about Uncertainty and Delay in Bargaining

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Author Info
Feinberg, Yossi (Stanford U)
Skyzypacz, Andrzej
Abstract

We study a one-sided offers bargaining game in which the buyer has private information about the value of the object and the seller has private infromation about his beliefs about the buyer. We show that this uncertainty about uncertainties dramatically changes the set of possible outcomes when compared to two-sided private information. In particular, higher order beliefs can lead to a dalay in reaching agreement even when the seller makes frequent offers, while in the case of two-sided first order private information, agreement is reached almost instantly. Furthermore, we show that not all types of higher order beliefs lead to a delay: the crucial condition is that when uncertain about uncertainties, one assigns positive probability to certainty.

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Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1765.

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Date of creation: Sep 2002
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Handle: RePEc:ecl:stabus:1765

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  1. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August. [Downloadable!] (restricted)
  2. Admati, Anat R & Perry, Motty, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Blackwell Publishing, vol. 54(3), pages 345-64, July. [Downloadable!] (restricted)
  3. Dilip Abreu & Faruk Gul, 2000. "Bargaining and Reputation," Econometrica, Econometric Society, vol. 68(1), pages 85-118, January.
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  4. Evans, Robert, 1989. "Sequential Bargaining with Correlated Values," Review of Economic Studies, Blackwell Publishing, vol. 56(4), pages 499-510, October. [Downloadable!] (restricted)
  5. Cho, In-Koo, 1990. "Uncertainty and Delay in Bargaining," Review of Economic Studies, Blackwell Publishing, vol. 57(4), pages 575-95, October. [Downloadable!] (restricted)
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  1. Hanming Fang & Stephen Morris, 2003. "Multidimensional Private Value Auctions," Cowles Foundation Discussion Papers 1423, Cowles Foundation, Yale University. [Downloadable!]
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  2. Jonathan Weinstein & Muhamet Yildiz, 2004. "Finite-Order Implications of Any Equilibrium," Levine's Working Paper Archive 122247000000000065, UCLA Department of Economics. [Downloadable!]
  3. Muhamet Yildiz & Jonathan Weinsten, 2004. "Impact of higher-order uncertainty," Econometric Society 2004 North American Winter Meetings 157, Econometric Society. [Downloadable!]
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