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Uncertainty about Uncertainty and Delay in Bargaining

  • Feinberg, Yossi

    (Stanford U)

  • Skyzypacz, Andrzej
Registered author(s):

    We study a one-sided offers bargaining game in which the buyer has private information about the value of the object and the seller has private infromation about his beliefs about the buyer. We show that this uncertainty about uncertainties dramatically changes the set of possible outcomes when compared to two-sided private information. In particular, higher order beliefs can lead to a dalay in reaching agreement even when the seller makes frequent offers, while in the case of two-sided first order private information, agreement is reached almost instantly. Furthermore, we show that not all types of higher order beliefs lead to a delay: the crucial condition is that when uncertain about uncertainties, one assigns positive probability to certainty.

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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP1765.pdf
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    Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1765.

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    Date of creation: Sep 2002
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    Handle: RePEc:ecl:stabus:1765
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    1. Cho, In-Koo, 1990. "Uncertainty and Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 57(4), pages 575-95, October.
    2. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    3. Peter Cramton, 1992. "Strategic Delay in Bargaining with Two-Sided Uncertainty," Papers of Peter Cramton 92res, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
    4. D. Abreu & F. Gul, 1998. "Bargaining and Reputation," Princeton Economic Theory Papers 00s9, Economics Department, Princeton University.
    5. Evans, Robert, 1989. "Sequential Bargaining with Correlated Values," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 499-510, October.
    6. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
    7. Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June.
    8. Admati, Anat R & Perry, Motty, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 345-64, July.
    9. Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
    10. Ausubel, Lawrence M. & Cramton, Peter & Deneckere, Raymond J., 2002. "Bargaining with incomplete information," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 3, chapter 50, pages 1897-1945 Elsevier.
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