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Bargaining with uncertain value distributions

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Listed:
  • Huan Xie

    (Concordia University)

Abstract

This paper studies a bargaining model in which the seller is uncertain about which distribution the buyer's values are drawn from. The distribution of the buyer's values is fixed across periods, while the buyer's values are drawn independently from the distribution each period. In the classical model of repeated bargaining where the buyer's value is drawn from a commonly known distribution and fixed across periods, the high-value buyer has a strong incentive to conceal his value, and the seller loses most of her bargaining power. An important question is whether adding a layer of uncertainty makes the high-value buyer more willing to accept high-price offers and improves the seller's revenue. We find this to be the case as long as the seller's ex ante beliefs are sufficiently optimistic.

Suggested Citation

  • Huan Xie, 2013. "Bargaining with uncertain value distributions," Economics Bulletin, AccessEcon, vol. 33(2), pages 1047-1066.
    • Handle: RePEc:ebl:ecbull:eb-12-00802
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    References listed on IDEAS

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    More about this item

    Keywords

    Repeated Bargaining; Uncertain Value Distributions; Revenue Comparison; Learning;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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