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Efficient non-cooperative bargaining despite keeping strategic information private

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  • Lukas, Elmar
  • Welling, Andreas

Abstract

The preferred method for negotiating joint value-added activities, such as e.g. licensing, co-venturing or supply chain expansion, is cooperative bargaining, where agents act rationally and have perfect information, i.e., information sharing occurs. In such settings, however, stronger partner often insist on keeping their valuable information private and thus cooperative bargaining cannot occur due to the lack of information sharing. Though, non-cooperative bargaining is usually assumed to be inefficient. Based on a game-theoretic real options model, we develop a contractual solution that allows the proposer to keep its valuable information private while at the same time motivates the other partner to act in a timely and efficient manner, that is, to be Pareto-efficient.

Suggested Citation

  • Lukas, Elmar & Welling, Andreas, 2017. "Efficient non-cooperative bargaining despite keeping strategic information private," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 287-294.
  • Handle: RePEc:eee:corfin:v:42:y:2017:i:c:p:287-294
    DOI: 10.1016/j.jcorpfin.2016.12.004
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    More about this item

    Keywords

    Optimal investment timing; Real options; Game theory; Supply chain; Negotiation;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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