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Separating equilibria in a continuous-time bargaining model with two-sided uncertainty

Author

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  • Ruqu Wang

    (Economics Department, Queen's University, Kingston, Ontario K7L 3N6, Canada)

Abstract

In this paper, we analyze the class of all smooth separating sequential equilibria in a continuous-time bargaining model with two-sided uncertainty. Trade between players occurs whenever there is surplus to be shared and delay is used to signal their valuations. When the buyer and the seller have a common discount rate, we show that the final outcome is unique among all these equilibria: the difference between the highest possible buyer's valuation and the lowest possible seller's valuation always narrows down at a rate exactly equal to the discount rate. When their discount rates differ, the more patient side always reveals his valuation first in the unique smooth separating equilibrium.

Suggested Citation

  • Ruqu Wang, 2000. "Separating equilibria in a continuous-time bargaining model with two-sided uncertainty," International Journal of Game Theory, Springer;Game Theory Society, vol. 29(2), pages 229-240.
    • Handle: RePEc:spr:jogath:v:29:y:2000:i:2:p:229-240
    Note: Received: November 1997/Final version: December 1999
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    Cited by:

    1. 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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