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Strategic Delay in Bargaining with Two-Sided Uncertainty

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Abstract

The role of strategic delay is analyzed in an infinite-horizon alternating-offer model of bargaining. A buyer and seller are engaged in the trade of a single object. Both bargainers have private information about their own preferences and are impatient in that delaying agreement is costly. An equilibrium is constructed in which the bargainers signal the strength of their bargaining positions by delaying prior to making an offer. A bargainer expecting large gains from trade is more impatient than one expecting small gains, and hence makes concessions earlier on. Trade occurs whenever gains from trade exist, but due to the private information, only after costly delay.

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File URL: http://www.cramton.umd.edu/papers1990-1994/92res-strategic-delay-in-bargaining.pdf
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Bibliographic Info

Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 92res.

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Length: 21 pages
Date of creation: 1992
Date of revision: 09 Jun 1998
Publication status: Published in Review of Economic Studies, 59:1, January 1992, pages 205-225.
Handle: RePEc:pcc:pccumd:92res

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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

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Keywords: Bargaining; Delay; Asymmetric Information;

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References

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  16. Ausubel, Lawrence M. & Deneckere, Raymond J., 1989. "A direct mechanism characterization of sequential bargaining with one-sided incomplete information," Journal of Economic Theory, Elsevier, vol. 48(1), pages 18-46, June.
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