Delay in Bargaining with Externalities
AbstractThis paper studies infinite-horizon bargaining between a seller and multiple buyers when externalities are present. We extend the analysis in Jehiel & Moldovanu (1995a), by allowing for both pure and mixed equilibria. This extension is warranted, since under some circumstances,the complexity of the equilibria with bounded recall they analyze tend to infinity as players become very patient. We show that stationary subgame perfect equilibria always exist. Moreover, a characterization of the stationary subgame perfect equilibria in generic games is presented. Equilibria with delay exist only for strong positive externalities. Since ach buyer receives a positive payoff when the seller agrees with some other buyer, positive externalities induces a war of attrition between buyers. Furthermore, the results when analyzing mixed stationary equilibria are different than when focusing on pure strategies with bounded recall as Jehiel & Moldovanu (1995a). Specifically, they find delay only when externalities are negative.
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Bibliographic InfoPaper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2006:29.
Length: 27 pages
Date of creation: 24 Nov 2006
Date of revision:
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More information through EDIRC
Bargaining; externalities; delay;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D62 - Microeconomics - - Welfare Economics - - - Externalities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-12-01 (All new papers)
- NEP-GTH-2006-12-01 (Game Theory)
- NEP-MIC-2006-12-01 (Microeconomics)
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