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Uncertainty about Uncertainty and Delay in Bargaining

Author

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  • Feinberg, Yossi

    (Stanford U)

  • Skyzypacz, Andrzej

Abstract

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.

Suggested Citation

  • Feinberg, Yossi & Skyzypacz, Andrzej, 2002. "Uncertainty about Uncertainty and Delay in Bargaining," Research Papers 1765, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:1765
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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP1765.pdf
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    References listed on IDEAS

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    1. Dilip Abreu & Faruk Gul, 2000. "Bargaining and Reputation," Econometrica, Econometric Society, vol. 68(1), pages 85-118, January.
    2. 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.
    3. In-Koo Cho, 1990. "Uncertainty and Delay in Bargaining," Review of Economic Studies, Oxford University Press, vol. 57(4), pages 575-595.
    4. Anat R. Admati & Motty Perry, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 345-364.
    5. 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.
    6. 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.
    7. Robert Evans, 1989. "Sequential Bargaining with Correlated Values," Review of Economic Studies, Oxford University Press, vol. 56(4), pages 499-510.
    8. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    9. Peter C. Cramton, 1992. "Strategic Delay in Bargaining with Two-Sided Uncertainty," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 205-225.
    10. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Weinstein, Jonathan & Yildiz, Muhamet, 2007. "Impact of higher-order uncertainty," Games and Economic Behavior, Elsevier, vol. 60(1), pages 200-212, July.
    2. repec:wsi:wschap:9789814374590_0009 is not listed on IDEAS
    3. Hanming Fang & Stephen Morris, 2012. "Multidimensional Private Value Auctions," World Scientific Book Chapters,in: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs, chapter 9, pages 319-356 World Scientific Publishing Co. Pte. Ltd..
    4. Jonathan Weinstein & Muhamet Yildiz, 2004. "Finite-Order Implications of Any Equilibrium," Levine's Working Paper Archive 122247000000000065, David K. Levine.

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