Bargaining, Search, and Outside Options
AbstractThis paper studies a two-sided incomplete information bargaining model between a seller and a buyer. The buyer has an outside option, which is modeled as a sequential search process during which he can also choose to return to bargaining at any time. Two cases considered: In Regime I, both agents have symmetric information about the search parameters. We find that, in contrast to bargaining with complete information, the option to return to bargaining is not redundant in equilibrium. However, the no-delay result still holds. In Regime II, where agents have asymmetric information about the outside option, delay is possible. The solution characterizes the parameters for renegotiation and those for search with no return to the bargaining table.
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Bibliographic InfoPaper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2007-16.
Date of creation: Aug 2007
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More information through EDIRC
Bargaining; Two-sided Incomplete Information; Outside Option; Search;
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-18 (All new papers)
- NEP-DGE-2007-08-18 (Dynamic General Equilibrium)
- NEP-GTH-2007-08-18 (Game Theory)
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