IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v110y2020i2p428-74.html
   My bibliography  Save this article

Bargaining and News

Author

Listed:
  • Brendan Daley
  • Brett Green

Abstract

We study a bargaining model in which a buyer makes frequent offers to a privately informed seller, while gradually learning about the seller's type from "news." We show that the buyer's ability to leverage this information to extract more surplus from the seller is remarkably limited. In fact, the buyer gains nothing from the ability to negotiate a better price despite the fact that a negotiation must take place in equilibrium. During the negotiation, the buyer engages in a form of costly "experimentation" by making offers that are sure to earn her negative payoffs if accepted, but speed up learning and improve her continuation payoff if rejected. We investigate the effects of market power by comparing our results to a setting with competitive buyers. Both efficiency and the seller's payoff can decrease by introducing competition among buyers.

Suggested Citation

  • Brendan Daley & Brett Green, 2020. "Bargaining and News," American Economic Review, American Economic Association, vol. 110(2), pages 428-474, February.
    • Handle: RePEc:aea:aecrev:v:110:y:2020:i:2:p:428-74
    DOI: 10.1257/aer.20181316
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/aer.20181316
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/aer.20181316.appx
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/aer.20181316.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://libkey.io/10.1257/aer.20181316?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mayer, Simon, 2022. "Financing breakthroughs under failure risk," Journal of Financial Economics, Elsevier, vol. 144(3), pages 807-848.
    2. Ortner, Juan, 2023. "Bargaining with evolving private information," Theoretical Economics, Econometric Society, vol. 18(3), July.
    3. Z. Eddie Ning, 2021. "List Price and Discount in a Stochastic Selling Process," Marketing Science, INFORMS, vol. 40(2), pages 366-387, March.
    4. Francesc Dilmé, 2021. "The Role of Discounting in Bargaining with One-Sided Offers," ECONtribute Discussion Papers Series 063, University of Bonn and University of Cologne, Germany.

    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:110:y:2020:i:2:p:428-74. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.