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Uncertainty about Uncertainty and Delay in Bargaining

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  • Yossi Feinberg
  • Andrzej Skrzypacz

Abstract

We study a one-sided offers bargaining game in which the buyer has private information about the value of the object and the seller has private information about his beliefs about the buyer's valuation. We show that this uncertainty about uncertainties dramatically changes the set of outcomes. In particular, second order beliefs can lead to a delay in reaching agreement even when the seller makes frequent offers. We show that not all types of second order beliefs lead to a delay. When the buyer assigns positive probability to the seller knowing the buyer's value, then delay not only can occur, but it must occur for a class of equilibria. However, in all other cases delay will never occur. Copyright The Econometric Society 2005.

Suggested Citation

  • Yossi Feinberg & Andrzej Skrzypacz, 2005. "Uncertainty about Uncertainty and Delay in Bargaining," Econometrica, Econometric Society, vol. 73(1), pages 69-91, January.
  • Handle: RePEc:ecm:emetrp:v:73:y:2005:i:1:p:69-91
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    File URL: http://hdl.handle.net/10.1111/j.1468-0262.2005.00565.x
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    Citations

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    Cited by:

    1. Srihari Govindan & Robert Wilson, 2009. "On Forward Induction," Econometrica, Econometric Society, vol. 77(1), pages 1-28, January.
    2. In-Koo Cho, 2007. "Perishable Durable Goods," Economics Working Papers 0077, Institute for Advanced Study, School of Social Science.
    3. Ming Li, 2009. "Information collection in bargaining," International Journal of Game Theory, Springer;Game Theory Society, vol. 38(4), pages 481-498, November.
    4. Mostafa Beshkar & Jee-Hyeong Park, 2017. "Dispute Settlement with Second-Order Uncertainty: The Case of International Trade Disputes," Caepr Working Papers 2017-010 Classification-K, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
    5. repec:wsi:wschap:9789814374590_0009 is not listed on IDEAS
    6. Hanming Fang & Stephen Morris, 2012. "Multidimensional Private Value Auctions," World Scientific Book Chapters,in: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs, chapter 9, pages 319-356 World Scientific Publishing Co. Pte. Ltd..
    7. Juan Vidal-Puga, 2005. "Reinterpreting the meaning of breakdown," Game Theory and Information 0501004, EconWPA.
    8. Andrés Perea & Willemien Kets, 2016. "When Do Types Induce the Same Belief Hierarchy?," Games, MDPI, Open Access Journal, vol. 7(4), pages 1-17, October.
    9. Qin, Cheng-Zhong & Yang, Chun-Lei, 2009. "An Explicit Approach to Modeling Finite-Order Type Spaces and Applications," University of California at Santa Barbara, Economics Working Paper Series qt8hq7j89k, Department of Economics, UC Santa Barbara.
    10. Weinstein, Jonathan & Yildiz, Muhamet, 2007. "Impact of higher-order uncertainty," Games and Economic Behavior, Elsevier, vol. 60(1), pages 200-212, July.
    11. repec:the:publsh:2543 is not listed on IDEAS
    12. Bond, Philip & Zhong, Hongda, 2016. "Buying high and selling low: stock repurchases and persistent asymmetric information," LSE Research Online Documents on Economics 67011, London School of Economics and Political Science, LSE Library.
    13. Juan Vidal-Puga, 2008. "Delay in the alternating-offers model of bargaining," International Journal of Game Theory, Springer;Game Theory Society, vol. 37(4), pages 457-474, December.
    14. Dang, Tri Vi, 2008. "Bargaining with endogenous information," Journal of Economic Theory, Elsevier, vol. 140(1), pages 339-354, May.
    15. Erica L. Plambeck & Terry A. Taylor, 2007. "Implications of Breach Remedy and Renegotiation Design for Innovation and Capacity," Management Science, INFORMS, vol. 53(12), pages 1859-1871, December.
    16. Jonathan Weinstein & Muhamet Yildiz, 2004. "Finite-Order Implications of Any Equilibrium," Levine's Working Paper Archive 122247000000000065, David K. Levine.
    17. Plambeck, Erica L. & Taylor, Terry A., 2004. "Implications of Breach Remedy and Renegotiation for Design of Supply Contracts," Research Papers 1888, Stanford University, Graduate School of Business.
    18. William Fuchs & Andrzej Skrzypacz, 2010. "Bargaining with Arrival of New Traders," American Economic Review, American Economic Association, pages 802-836.
    19. Bradley Larsen, 2014. "The Efficiency of Real-World Bargaining: Evidence from Wholesale Used-Auto Auctions," NBER Working Papers 20431, National Bureau of Economic Research, Inc.
    20. Ortner, Juan, 2013. "Optimism, delay and (in)efficiency in a stochastic model of bargaining," Games and Economic Behavior, Elsevier, vol. 77(1), pages 352-366.
    21. Rong, Kang, 2013. "Impact of second-order uncertainty on the efficiency of the 0.5-double auction," Mathematical Social Sciences, Elsevier, vol. 65(1), pages 67-71.

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