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Bargaining with endogenous information

  • 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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    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. Dirk Bergemann & Juuso Vaimaki, 2000. "Information Acquisition and Efficient Mechanism Design," Cowles Foundation Discussion Papers 1248, Cowles Foundation for Research in Economics, Yale University.
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    3. Lawrence M. Ausubel & Peter Cramton & Raymond J. Deneckere, 2002. "Bargaining with Incomplete Information," Papers of Peter Cramton 02barg, University of Maryland, Department of Economics - Peter Cramton, revised 12 Mar 2001.
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    5. Cho, In-Koo, 1990. "Uncertainty and Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 57(4), pages 575-95, October.
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    7. Khalil, F & Rochet, J-C, 1997. "Strategic Information Gathering Before a Contract is Offered," Discussion Papers in Economics at the University of Washington 97-15, Department of Economics at the University of Washington.
    8. Raquel Fernandez & Jacob Glazer, 1989. "Striking for a Bargain Between Two Completely Informed Agents," NBER Working Papers 3108, National Bureau of Economic Research, Inc.
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    17. Daniel R. Vincent, 1988. "Bargaining with Common Values," Discussion Papers 775, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    18. Philip J Reny & Motty Perry, 2006. "Toward a Strategic Foundation for Rational Expectations Equilibrium," Econometrica, Econometric Society, vol. 74(5), pages 1231-1269, 09.
    19. Evans, Robert, 1989. "Sequential Bargaining with Correlated Values," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 499-510, October.
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