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Repeated Bargaining with Persistent Private Information

Author

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  • Kennan, J.

Abstract

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.

Suggested Citation

  • Kennan, J., 1997. "Repeated Bargaining with Persistent Private Information," Working papers 9708, Wisconsin Madison - Social Systems.
    • Handle: RePEc:att:wimass:9708
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    Cited by:

    1. Huan Xie, 2013. "Bargaining with uncertain value distributions," Economics Bulletin, AccessEcon, vol. 33(2), pages 1047-1066.
    2. James M. Malcomson, 2016. "Relational Incentive Contracts With Persistent Private Information," Econometrica, Econometric Society, vol. 84, pages 317-346, January.
    3. Battaglini, Marco, 2007. "Optimality and renegotiation in dynamic contracting," Games and Economic Behavior, Elsevier, vol. 60(2), pages 213-246, August.
    4. Susan Athey & Kyle Bagwell, 2008. "Collusion With Persistent Cost Shocks," Econometrica, Econometric Society, vol. 76(3), pages 493-540, May.
    5. Martino Banchio & Frank Yang, 2021. "Dynamic Pricing with Limited Commitment," Papers 2102.07742, arXiv.org, revised Dec 2021.
    6. Ortner, Juan, 2023. "Bargaining with evolving private information," Theoretical Economics, Econometric Society, vol. 18(3), July.
    7. Bita Hajihashemi & Amin Sayedi & Jeffrey D. Shulman, 2022. "The Perils of Personalized Pricing with Network Effects," Marketing Science, INFORMS, vol. 41(3), pages 477-500, May.
    8. Richard Chung & Bryan Byung-Hee Lee & Woo-Jong Lee & Byungcherl Charlie Sohn, 2016. "Do Managers Withhold Good News from Labor Unions?," Management Science, INFORMS, vol. 62(1), pages 46-68, January.
    9. Loginova, Oksana & Taylor, Curtis, 2003. "Price Experimentation with Strategic Buyers," Working Papers 03-02, Duke University, Department of Economics.
    10. J. Benjamin & P. Chinloy & G. Jud & D. Winkler, 2007. "Do Some People Work Harder than Others? Evidence from Real Estate Brokerage," The Journal of Real Estate Finance and Economics, Springer, vol. 35(1), pages 95-110, July.
    11. Jia, Kunhao & Liao, Xiuwu & Feng, Juan, 2018. "Selling or leasing? Dynamic pricing of software with upgrades," European Journal of Operational Research, Elsevier, vol. 266(3), pages 1044-1061.
    12. Phelan, Christopher, 2006. "Public trust and government betrayal," Journal of Economic Theory, Elsevier, vol. 130(1), pages 27-43, September.
    13. Elizabeth Hemphill, 2007. "Factors Affecting Real Estate Broker Selection: What Really Counts?," International Real Estate Review, Global Social Science Institute, vol. 10(1), pages 1-25.
    14. Raphael Boleslavsky & Maher Said, 2013. "Progressive Screening: Long-Term Contracting with a Privately Known Stochastic Process," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(1), pages 1-34.
    15. Cantillon, Estelle & Asker, John, 2005. "Optimal Procurement When Both Price and Quality Matter," CEPR Discussion Papers 5276, C.E.P.R. Discussion Papers.
    16. Marco Battaglini, 2005. "Long-Term Contracting with Markovian Consumers," American Economic Review, American Economic Association, vol. 95(3), pages 637-658, June.
    17. Amit Mehra & Ram Bala & Ramesh Sankaranarayanan, 2012. "Competitive Behavior-Based Price Discrimination for Software Upgrades," Information Systems Research, INFORMS, vol. 23(1), pages 60-74, March.
    18. Lemke, Robert J., 2004. "Dynamic bargaining with action-dependent valuations," Journal of Economic Dynamics and Control, Elsevier, vol. 28(9), pages 1847-1875, July.
    19. Dutta, Prajit K., 2021. "Compromise is key in infinitely repeated bargaining with an Evergreen Clause," Journal of Economic Theory, Elsevier, vol. 193(C).

    More about this item

    Keywords

    INFORMATION ; CONTRACTS;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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