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Bargaining Before or After Communication?

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  • Birger Wernerfelt

Abstract

We ask how bargainers' incentives to communicate about more efficient widget designs depend on whether they negotiate price prior to, or after, fixing the traded design. We find three effects: (1) Since communication reveals information about preferences, bargainers with little power prefer to remain quiet prior to bargaining. (2) Later bargaining gives communicators a chance to share in joint gains from more efficient trades. (3) The revealed preference information enhances the efficiency of the bargaining process. The comparison might help explain why some contracts have more features left incomplete and throw some light on the nature of the employment relationship.

Suggested Citation

  • Birger Wernerfelt, 2008. "Bargaining Before or After Communication?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(2), pages 211-229, June.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200806)164:2_211:bboac_2.0.tx_2-a
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    Cited by:

    1. Birger Wernerfelt, 2013. "Small forces and large firms: Foundations of the RBV," Strategic Management Journal, Wiley Blackwell, vol. 34(6), pages 635-643, June.

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    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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