IDEAS home Printed from https://ideas.repec.org/p/bon/boncrc/crctr224_2023_479.html
   My bibliography  Save this paper

The Role of Discounting in Bargaining with Private Information

Author

Listed:
  • Francesc Dilmé

Abstract

In this paper we analyze a continuous-time Coase setting with finite horizon, interdependent values, and different discount rates for the buyer and seller. We fully characterize the equilibrium behavior, which permits us to study how the agents’ discount rates (i.e., patience levels) shape the bargaining outcome. We find that the seller’s commitment problem persists even when she is fully patient, and that higher seller impatience may lead to higher equilibrium prices. Higher buyer impatience, on the other hand, incentivizes the buyer to trade earlier, which accelerates price decline since the seller’s commitment problem is more severe at earlier times. Under appropriate conditions, we conclude that the buyer is better off when he is more impatient, independently of his private valuation; hence, higher bargaining costs may give negotiators with private information greater bargaining power.

Suggested Citation

  • Francesc Dilmé, 2023. "The Role of Discounting in Bargaining with Private Information," CRC TR 224 Discussion Paper Series crctr224_2023_479, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2023_479
    as

    Download full text from publisher

    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp479
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michael Landsberger & Isaac Meilijson, 1985. "Intertemporal Price Discrimination and Sales Strategy under Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 424-430, Autumn.
    2. Joel Sobel & Takahashi, 1983. "A Multi-stage Model of Bargaining," Levine's Working Paper Archive 255, David K. Levine.
    3. Berbeglia, Gerardo & Sloan, Peter & Vetta, Adrian, 2019. "The finite horizon, undiscounted, durable goods monopoly problem with finitely many consumers," Journal of Mathematical Economics, Elsevier, vol. 82(C), pages 171-183.
    4. Joel Sobel & Ichiro Takahashi, 1983. "A Multistage Model of Bargaining," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(3), pages 411-426.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Francesc Dilmé, 2021. "The Role of Discounting in Bargaining with One-Sided Offers," ECONtribute Discussion Papers Series 063, University of Bonn and University of Cologne, Germany.
    2. Doval, Laura & Skreta, Vasiliki, 2024. "Optimal mechanism for the sale of a durable good," Theoretical Economics, Econometric Society, vol. 19(2), May.
    3. Bradley J Larsen, 2021. "The Efficiency of Real-World Bargaining: Evidence from Wholesale Used-Auto Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(2), pages 851-882.
    4. repec:mcm:deptwp:2024-02 is not listed on IDEAS
    5. Sandro Shelegia & Joshua Sherman, 2014. "When the Price You See Is Not the Price You Get: A Bargaining Study," Vienna Economics Papers 1410, University of Vienna, Department of Economics.
    6. Henry S. Farber, 2001. "Notes on the Economics of Labor Unions," Working Papers 2001-5, Princeton University. Economics Department..
    7. Sandro Shelegia & Joshua Sherman, 2014. "When the Price You See Is Not the Price You Get: A Bargaining Study," Vienna Economics Papers vie1410, University of Vienna, Department of Economics.
    8. Max H. Bazerman & Henry S. Farber, 1987. "Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence from a Comparison of Arbitration Schemes," Working Papers 1987-1, Princeton University. Economics Department..
    9. Kletzer, Kenneth, 1989. "Inefficient Private Renegotiation of Sovereign Debt," CEPR Discussion Papers 357, C.E.P.R. Discussion Papers.
    10. Andrés Abeliuk & Gerardo Berbeglia & Pascal Van Hentenryck, 2015. "Bargaining Mechanisms for One-Way Games," Games, MDPI, vol. 6(3), pages 1-21, September.
    11. Daniel Herold, 2017. "Information Exchange in Retail Markets with Uncertainty about Downstream Costs," MAGKS Papers on Economics 201750, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    12. Ahmadi, Iman & Skiera, Bernd & Lambrecht, Anja & Heubrandner, Florian, 2017. "Time preferences and the pricing of complementary durables and consumables," International Journal of Research in Marketing, Elsevier, vol. 34(4), pages 813-828.
    13. Tian Xia & Richard Sexton, 2010. "Brand or Variety Choices and Periodic Sales as Substitute Instruments for Monopoly Price Discrimination," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(4), pages 333-349, June.
    14. Wagneur, Edouard, 1988. "Négociation collective et théorie des jeux : le rôle du temps dans la littérature récente," L'Actualité Economique, Société Canadienne de Science Economique, vol. 64(1), pages 68-95, mars.
    15. Card, David & Olson, Craig A, 1995. "Bargaining Power, Strike Durations, and Wage Outcomes: An Analysis of Strikes in the 1880s," Journal of Labor Economics, University of Chicago Press, vol. 13(1), pages 32-61, January.
    16. Antonio Merlo & François Ortalo-Magné, 2002. "Bargaining over Residential Real Estate: Evidence from England (Third Version)," PIER Working Paper Archive 04-020, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 11 Mar 2004.
    17. Sambuddha Ghosh & Gabriele Gratton & Caixia Shen, 2019. "Intimidation: Linking Negotiation And Conflict," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(4), pages 1589-1618, November.
    18. Van Damme, Eric & Selten, Reinhard & Winter, Eyal, 1990. "Alternating bid bargaining with a smallest money unit," Games and Economic Behavior, Elsevier, vol. 2(2), pages 188-201, June.
    19. Hikmet Gunay, 2014. "Waiting for Signaling Quality," Southern Economic Journal, John Wiley & Sons, vol. 81(2), pages 364-386, October.
    20. Li Li & Li Jiang, 2022. "How should firms adapt pricing strategies when consumers are time‐inconsistent?," Production and Operations Management, Production and Operations Management Society, vol. 31(9), pages 3457-3473, September.
    21. Guth, Werner & Ockenfels, Peter & Ritzberger, Klaus, 1995. "On durable goods monopolies an experimental study of intrapersonal price competition and price discrimination over time," Journal of Economic Psychology, Elsevier, vol. 16(2), pages 247-274, July.

    More about this item

    Keywords

    Bargaining with private information; different discount factors;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bon:boncrc:crctr224_2023_479. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CRC Office (email available below). General contact details of provider: https://www.crctr224.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.