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Bargaining with a Possibly Committed Seller

  • Roman Inderst

    (London School of Economics)

We consider negotiations with an open time horizon where a buyer has private information about his valuation and does not know whether the seller is committed to the advertised price. This setting combines two common specifications made in the noncooperative bargaining literature: one side is privately informed about its valuation, which is drawn from a continuum, and the other side is possibly committed to a fixed offer. We analyze the game both in discrete and in continuous time and show convergence of the two settings, which extends results from Abreu and Gul (2000). One interesting result is that as time proceeds, the non-committed seller becomes less likely to concede in a given period, i.e., it appears as if he becomes more 'stubborn' further show that a seller may prefer to negotiate with a âworseâ as this enhances the value of his possible commitment. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2005.02.002
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 8 (2005)
Issue (Month): 4 (October)
Pages: 927-944

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Handle: RePEc:red:issued:v:8:y:2005:i:4:p:927-944
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  1. Hendricks, Kenneth & Weiss, Andrew & Wilson, Charles, 1987. "The War of Attrition in Continuous Time with Complete Information," Working Papers 87-03, C.V. Starr Center for Applied Economics, New York University.
  2. Kambe, Shinsuke, 1999. "Bargaining with Imperfect Commitment," Games and Economic Behavior, Elsevier, vol. 28(2), pages 217-237, August.
  3. Kennan, John & Wilson, Robert, 1993. "Bargaining with Private Information," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 45-104, March.
  4. Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
  5. Ausubel, Lawrence M & Deneckere, Raymond J, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Econometrica, Econometric Society, vol. 57(3), pages 511-31, May.
  6. Dilip Abreu & Faruk Gul, 2000. "Bargaining and Reputation," Econometrica, Econometric Society, vol. 68(1), pages 85-118, January.
  7. Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June.
  8. Olivier Compte & Philippe Jehiel, 2002. "On the Role of Outside Options in Bargaining with Obstinate Parties," Econometrica, Econometric Society, vol. 70(4), pages 1477-1517, July.
  9. Ausubel, Lawrence M & Deneckere, Raymond J, 1992. "Durable Goods Monopoly with Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 795-812, October.
  10. Larry M. Ausubel & Raymond J. Deneckere, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Levine's Working Paper Archive 201, David K. Levine.
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