Repeated Bargaining with Persistent Private Information
The paper analyzes repeated contract negotiations involving the same buyer and seller where the contracts are linked because the buyer has persistent (but not fully permanent) private information. (The main application is labor contracts, where the employer has private information about the value of labor services sold by the union). The size of the surplus being divided is specified as a two-state Markov chain with transitions that are synchronized with contract negotiation dates. Equilibrium involves information cycles triggered by the success or failure of aggressive demands made by the seller. The main result characterizes a class of cyclic weak-Markov-Perfect equilibria.
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|Date of creation:||1997|
|Date of revision:|
|Contact details of provider:|| Postal: UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.|
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