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Buying the Option to say "No"

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  • Lang, Gunther
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    Abstract

    We analyze a simple model of bilateral bargaining under asymmetric information where the seller of an object can not simply say "no" by default to a buyer who is supposed to make a take-it-or-leave-it oer. Rather, he must acquire this option before the actual bargaining process begins. This choice is observable to the buyer, and hence, the seller's prebargaining action might signal private information. We develop a complete characterization of Perfect Bayesian Equilibrium in pure and (strictly) mixed strategies for this game. Then the model is compared to a standard bargaining setting in terms of the realization of welfare enhancing propertyright changes.

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    File URL: http://fesrvsd.fe.unl.pt/WPFEUNL/WP2000/wp397.pdf
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    Bibliographic Info

    Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp397.

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    Length: 13 pages
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:unl:unlfep:wp397

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    Web page: http://www.fe.unl.pt

    Related research

    Keywords: Bargaining; Signalling;

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