Bargaining models ask how a surplus is split between two parties in bilateral monopoly. Much of real-world negotiation involves complications to the original split which may or may not increase the welfare of both parties. The parties must decide which complications to propose, how closely to examine the other side's proposals, and when to accept them. This type of negotiation raises welfare, rather than reducing it. This paper models negotiation as a two-period auditing game, and find a variety of plausible equilibria, some of which can be pareto-ranked. Expectations are highly important, and precommitment can increase welfare substantially.
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Length: Date of creation: 14 Jun 1995 Date of revision:
14 Jun 1995 Handle: RePEc:wpa:wuwpga:9506001
Note: A 64KB LaTeX file. A postscript file is available on request from Erasmuse@Indiana.edu. Contact details of provider: Web page: http://129.3.20.41
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Find related papers by JEL classification: C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory D8 - Microeconomics - - Information, Knowledge, and Uncertainty
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Lawrence M. Ausubel & Peter Cramton & Raymond J. Deneckere, 2002.
"Bargaining with Incomplete Information,"
Papers of Peter Cramton
02barg, University of Maryland, Department of Economics - Peter Cramton, revised 12 Mar 2001.
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