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The Role of Information in Different Bargaining Protocols

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  • Rafael Hortala-Vallve

    (Government Department, London School of Economics)

  • Aniol Llorente-Saguer

    ()
    (Max Planck Institute for Research on Collective Goods, Bonn)

  • Rosemarie Nagel

    (Universitat Pompeu Fabra, ICREA)

Abstract

We analyze a bargaining protocol recently proposed in the literature vis-à-vis unconstrained negotiation. This new mechanism extracts “gains from trade” inherent in the differing valuation of two parties towards various issues where conflict exists. We assess the role of incomplete vs. complete information in the efficiency achieved by this new mechanism and by unconstrained negotiation. We find that unconstrained negotiation does best under a situation of complete information where the valuations of both bargaining parties are common knowledge. Instead, the newly proposed mechanism does best in a situation with incomplete information. The sources of inefficiencies in each of the two cases arise from the different strategic use of the available information.

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Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2012_12.

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Date of creation: May 2012
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Handle: RePEc:mpg:wpaper:2012_12

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  2. Hortala-Vallve, Rafael & Llorente-Saguer, Aniol, 2010. "A simple mechanism for resolving conflict," Games and Economic Behavior, Elsevier, vol. 70(2), pages 375-391, November.
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  14. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-26, December.
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  19. Matthew O Jackson & Hugo F Sonnenschein, 2007. "Overcoming Incentive Constraints by Linking Decisions -super-1," Econometrica, Econometric Society, vol. 75(1), pages 241-257, 01.
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