Bilateral Bargaining in an Ambiguous Environment
AbstractWe perturb the bilateral bargaining model by introducing small ambiguity (via the epsilon contamination model) about the agents' types. We assume that the preferences are characterized by ambiguity aversion (Gilboa-Schmeidler). The rest of the setup is exactly as in Myerson and Satterthwaite . And we show that in this environment, it is possible to design a mechanism that generates almost-efficient trade. Crucially, the mechanism has to be extensive-form; standard (normal form) direct revelation mechanism can only generate outcome that is continuous with respect to the amount of ambiguity.
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Bibliographic InfoPaper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 12/10.
Date of creation: May 2012
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Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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- Cesaltina Pacheco Pires, 2002. "A Rule For Updating Ambiguous Beliefs," Theory and Decision, Springer, Springer, vol. 53(2), pages 137-152, September.
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"A Dynamic Mechanism and Surplus Extraction Under Ambiguity,"
Discussion Papers in Economics, Department of Economics, University of Leicester
08/24, Department of Economics, University of Leicester.
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"Dynamic Choice Under Ambiguity,"
Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science
1430, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Bose, Subir & Ozdenoren, Emre & Pape, Andreas, 2006.
"Optimal auctions with ambiguity,"
Theoretical Economics, Econometric Society,
Econometric Society, vol. 1(4), pages 411-438, December.
- Andreas Pape & Subir Bose & Emre Ozdenoren, 2004. "Optimal auctions with ambiguity," Econometric Society 2004 North American Summer Meetings, Econometric Society 609, Econometric Society.
- Epstein, Larry G. & Schneider, Martin, 2003.
Journal of Economic Theory, Elsevier,
Elsevier, vol. 113(1), pages 1-31, November.
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