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Bargaining with endogenous information

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  • Dang, Tri Vi

Abstract

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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  • Dang, Tri Vi, 2008. "Bargaining with endogenous information," Journal of Economic Theory, Elsevier, vol. 140(1), pages 339-354, May.
    • Handle: RePEc:eee:jetheo:v:140:y:2008:i:1:p:339-354
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