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Commitment Through Incomplete Information in a Simple Repeated Bargaining Game

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  • K. Schmidt

Abstract

This paper analyzes a finitely repeated bargaining game with asymmetric information. It gives a tight characterization of the equilibrium path and the equilibrium payoffs of all sequential equilibria satisfying a weak Markov property. The method used allows for arbitrarily many different types and provides an intuitive understanding of how \"reputation\" works. It is shown that the seller can use the incomplete information about his costs to credibly threaten never to accept a price lower than his highest possible costs before the very end of the game. The result holds for any discount factor of the seller greater than 0.5. Journal of Economic LiteratureClassification Numbers: C78, D83.
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Suggested Citation

  • K. Schmidt, 2010. "Commitment Through Incomplete Information in a Simple Repeated Bargaining Game," Levine's Working Paper Archive 605, David K. Levine.
  • Handle: RePEc:cla:levarc:605
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    File URL: http://www.dklevine.com/archive/refs4605.pdf
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    Cited by:

    1. Juan I. Beccuti, 2014. "Optimal Selling Mechanisms under Imperfect Commitment: Extending to the Multi-Period Case," Diskussionsschriften dp1402, Universitaet Bern, Departement Volkswirtschaft.
    2. Cripps, Martin W. & Dekel, Eddie & Pesendorfer, Wolfgang, 2005. "Reputation with equal discounting in repeated games with strictly conflicting interests," Journal of Economic Theory, Elsevier, vol. 121(2), pages 259-272, April.
    3. Vincent Conitzer & Curtis R. Taylor & Liad Wagman, 2012. "Hide and Seek: Costly Consumer Privacy in a Market with Repeat Purchases," Marketing Science, INFORMS, vol. 31(2), pages 277-292, March.
    4. Arieh Gavious & Ella Segev, 2017. "Price Discrimination Based on Buyers’ Purchase History," Dynamic Games and Applications, Springer, vol. 7(2), pages 229-265, June.
    5. Darryl T. Banks & J. Wesley Hutchinson & Robert J. Meyer, 2002. "Reputation in Marketing Channels: Repeated-Transactions Bargaining with Two-Sided Uncertainty," Marketing Science, INFORMS, vol. 21(3), pages 251-272, December.
    6. repec:spr:jogath:v:47:y:2018:i:1:d:10.1007_s00182-017-0587-5 is not listed on IDEAS
    7. Curtis Taylor & Liad Wagman, 2008. "Who Benefits From Online Privacy?," Working Papers 08-26, NET Institute.
    8. Kambe, Shinsuke, 1999. "Bargaining with Imperfect Commitment," Games and Economic Behavior, Elsevier, vol. 28(2), pages 217-237, August.
    9. repec:eee:ejores:v:266:y:2018:i:3:p:1044-1061 is not listed on IDEAS
    10. Jihong Lee & Qingmin Liu, 2008. "The Dynamics of Bargaining Postures: The Role of a Third Party," PIER Working Paper Archive 09-001, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    11. repec:eee:joinma:v:28:y:2014:i:1:p:68-85 is not listed on IDEAS
    12. Juan I. Beccuti, 2014. "Optimal Selling Mechanisms under Imperfect Commitment," Diskussionsschriften dp1401, Universitaet Bern, Departement Volkswirtschaft.

    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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