Optimism, delay and (in)efficiency in a stochastic model of bargaining
I study a bilateral bargaining game in which the size of the surplus follows a stochastic process and in which players might be optimistic about their bargaining power. Following Yildiz (2003), I model optimism by assuming that players have different beliefs about the recognition process. I show that the unique subgame perfect equilibrium of this game might involve inefficient delays. I also show that these inefficiencies disappear when players can make offers arbitrarily frequently.
References listed on IDEAS
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- Muhamet Yildiz, 2004. "Waiting to Persuade," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 223-248. Full references (including those not matched with items on IDEAS)
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