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Mediation: incomplete information bargaining with filtered communication

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  • Jarque, Xavier
  • Ponsati, Clara
  • Sakovics, Jozsef

Abstract

We analyze a continuous-time bilateral double auction in the presence of two-sided incomplete information and a smallest money unit. A distinguishing feature of our model is that intermediate concessions are not observable by the adversary: they are only communicated to a passive auctioneer. An alternative interpretation is that of mediated bargaining. We show that an equilibrium using only the extreme agreements always exists and display the necessary and sufficient condition for the existence of (perfect Bayesian) equilibria which yield intermediate agreements. For the symmetric case with uniform type distribution we numerically calculate the equilibria. We find that the equilibrium which does not use compromise agreements is the least efficient, however, the rest of the equilibria yield the lower social welfare the higher number of compromise agreements are used.
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  • Jarque, Xavier & Ponsati, Clara & Sakovics, Jozsef, 2003. "Mediation: incomplete information bargaining with filtered communication," Journal of Mathematical Economics, Elsevier, vol. 39(7), pages 803-830, September.
  • Handle: RePEc:eee:mateco:v:39:y:2003:i:7:p:803-830
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    1. Van Damme, Eric & Selten, Reinhard & Winter, Eyal, 1990. "Alternating bid bargaining with a smallest money unit," Games and Economic Behavior, Elsevier, vol. 2(2), pages 188-201, June.
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    Cited by:

    1. Johannes Hörner & Nicolas Sahuguet, 2011. "A war of attrition with endogenous effort levels," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 1-27, May.
    2. Vida, Péter & Āzacis, Helmuts, 2013. "A detail-free mediator," Games and Economic Behavior, Elsevier, vol. 81(C), pages 101-115.
    3. Camiña, Ester & Porteiro, Nicolás, 2009. "The role of mediation in peacemaking and peacekeeping negotiations," European Economic Review, Elsevier, vol. 53(1), pages 73-92, January.
    4. Langlois Catherine C & Langlois Jean-Pierre P., 2010. "Costly Interference: A Game Theoretic Analysis of Sanctions," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 16(1), pages 1-34, June.
    5. Barry O'Neill, 2018. "Two-Party Agreements as Circular Sets," Discussion Paper Series dp722, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    6. Damiano, Ettore & Li, Hao & Suen, Wing, 2012. "Optimal deadlines for agreements," Theoretical Economics, Econometric Society, vol. 7(2), May.
    7. Heifetz, Aviad & Segev, Ella, 2005. "Escalation and delay in protracted international conflicts," Mathematical Social Sciences, Elsevier, vol. 49(1), pages 17-37, January.

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