Dynamic Bargaining with Transaction Costs
AbstractA buyer and seller alternate making offers until an offer is accepted or someone terminates negotiations. The seller's valuation is common knowledge, but the buyer's valuation is known only by the buyer. Impatience to reach an agreement comes from two sources: the traders discount future payoffs and there are transaction costs of bargaining. Equilibrium behavior involves either immediate trade, delayed trade, or immediate termination, depending on the size of the gains from trade and the relative bargaining costs. This contrasts with the pure discounting model where termination never occurs, and the pure transaction cost model where delayed trade never occurs.
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Bibliographic InfoPaper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 91ms.
Length: 13 pages
Date of creation: 1991
Date of revision: 15 Jun 1998
Publication status: Published in Management Science, 37:10, October 1991, pages 1221-1233. Erratum published in Management Science, 39:2, February 1993, page 253.
Contact details of provider:
Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
Fax: (202) 318-0520
Web page: http://www.cramton.umd.edu
Bargaining; Negotiation; Delay; Signalling Games; Transaction Costs.;
Other versions of this item:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- Ahmet Ozkardas & Agnieszka Rusinowska, 2013. "An application of wage bargaining to price negotiation with discount factors varying in time," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00881151, HAL.
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- Peter Cramton & Joseph S. Tracy, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," Papers of Peter Cramton 92aer, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
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- Ahmet Ozkardas & Agnieszka Rusinowska, 2013. "An application of wage bargaining to price negotiation with discount factors varying in time," Documents de travail du Centre d'Economie de la Sorbonne 13066, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
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