The Perverse Effects of Outside Options on Strategic Delay in Bargaining
This paper shows that giving a player an outside option can worsen his payoff in a bargaining game with strategic delay. If the seller has the option to terminate bargaining and sell the good on the spot market, this can limit the ability of a low-valuation buyer to use delayed responses to signal her type. As a result, high-valuation buyers cannot immediately accept a seller´s offer with probability one, worsening the seller´s payoff.
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Volume (Year): 165 (2009)
Issue (Month): 2 (June)
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