Incomplete Information Bargaining with Outside Opportunities
AbstractWe consider two kinds of â€˜outside opportunityâ€™ that a seller of an indivisible good might have: selling to a different buyer and consuming the good herself. In both models the seller is uncertain about the buyer's valuation, and becomes more pessimistic over time. When the seller becomes sufficiently pessimistic, she prefers the outside opportunity, so she will not bargain indefinitely with the current buyer. Despite the resulting finite-horizon nature of negotiations, the link between the buyer's willingness to accept an offer and the seller's eagerness to go "outside" generates multiple equilibria.
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Bibliographic InfoPaper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3196301.
Date of creation: 1987
Date of revision:
Publication status: Published in Quarterly Journal of Economics
Other versions of this item:
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