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Uncertainty about Uncertainty and Delay in Bargaining

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  • Feinberg, Yossi

    (Stanford U)

  • Skyzypacz, Andrzej
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    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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    Bibliographic Info

    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. D. Abreu & F. Gul, 1998. "Bargaining and Reputation," Princeton Economic Theory Papers 00s9, Economics Department, Princeton University.
    2. Faruk Gul & Hugo Sonnenschein & Robert Wilson, 2010. "Foundations of Dynamic Monopoly and the Coase Conjecture," Levine's Working Paper Archive 232, David K. Levine.
    3. Cramton, Peter C, 1992. "Strategic Delay in Bargaining with Two-Sided Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 205-25, January.
    4. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    5. David Kreps & Paul Milgrom & John Roberts & Bob Wilson, 2010. "Rational Cooperation in the Finitely Repeated Prisoners' Dilemma," Levine's Working Paper Archive 239, David K. Levine.
    6. Cho, In-Koo, 1990. "Uncertainty and Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 57(4), pages 575-95, October.
    7. Evans, Robert, 1989. "Sequential Bargaining with Correlated Values," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 499-510, October.
    8. Lawrence M. Ausubel & Peter Cramton & Raymond J. Deneckere, 2002. "Bargaining with Incomplete Information," Papers of Peter Cramton 02barg, University of Maryland, Department of Economics - Peter Cramton, revised 12 Mar 2001.
    9. Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
    10. Admati, Anat R & Perry, Motty, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 345-64, July.
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    Cited by:
    1. Hanming Fang, 2004. "Multidimensional Private Value Auctions," Theory workshop papers 121473000000000021, UCLA Department of Economics.
    2. Weinstein, Jonathan & Yildiz, Muhamet, 2007. "Impact of higher-order uncertainty," Games and Economic Behavior, Elsevier, vol. 60(1), pages 200-212, July.
    3. Jonathan Weinstein & Muhamet Yildiz, 2004. "Finite-Order Implications of Any Equilibrium," Levine's Working Paper Archive 122247000000000065, David K. Levine.

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