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Bargaining with endogenous information

Listed author(s):
  • Dang, Tri Vi
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    This paper analyses information acquisition in ultimatum bargaining with common values. Because of an endogenous lemons problem the equilibrium payoffs of the agents are non-monotonic in the information cost. The mere possibility of information acquisition can cause no trade although the agents maintain symmetric information in equilibrium and the gain from trade is common knowledge. The agent responding to a take-it-or-leave-it offer may capture some or even the full trading surplus in a perfect Bayesian equilibrium. The implications for sequential bargaining are discussed.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0022-0531(07)00118-4
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    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 140 (2008)
    Issue (Month): 1 (May)
    Pages: 339-354

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    Handle: RePEc:eee:jetheo:v:140:y:2008:i:1:p:339-354
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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    1. Crémer, Jacques & Khalil, Fahad & Rochet, Jean-Charles, 1996. "Strategic Information Gathering Before a Contract Is Offered," IDEI Working Papers 61, Institut d'Économie Industrielle (IDEI), Toulouse.
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