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Mediation: Incomplete information bargaining with filtered communication

  • Xavier Jarque
  • Clara Ponsati
  • Jozsef Sakovics

    ()

We analyze a continuous-time bilateral double auction in the presence of two-sided incomplete information and a smallest money unit. A distinguishing feature of our model is that intermediate concessions are not observable by the adversary: they are only communicated to a passive auctioneer. An alternative interpretation is that of mediated bargaining. We show that an equilibrium using only the extreme agreements always exists and display the necessary and sucient condition for the existence of (perfect Bayesian) equilibra which yield intermediate agreements. For the symmetric case with uniform type distribution we numerically calculate the equilibria. We find that the equilibrium which does not use compromise agreements is the least ecient, however, the rest of the equilibria yield the lower social welfare the higher number of compromise agreements are used.

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Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 75.

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Length: 34
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:edn:esedps:75
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  1. Ponsati C. & Sakovics, J., 1996. "The war of attrition with incomplete information," Mathematical Social Sciences, Elsevier, vol. 31(1), pages 54-54, February.
  2. Lawrence M. Ausubel & Peter Cramton & Raymond J. Deneckere, 2002. "Bargaining with Incomplete Information," Papers of Peter Cramton 02barg, University of Maryland, Department of Economics - Peter Cramton, revised 12 Mar 2001.
  3. Erik van Damme & Reinhard Selten & Eyal Winter, 1989. "Alternating Bid Bargaining with a Smallest Money Unit," Discussion Paper Serie A 253, University of Bonn, Germany.
  4. Watson, Joel, 1998. "Alternating-Offer Bargaining with Two-Sided Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 65(3), pages 573-94, July.
  5. Broman, Elizabeth M., 1989. "The bilateral monopoly model: Approaching certainty under the split-the-difference mechanism," Journal of Economic Theory, Elsevier, vol. 48(1), pages 134-151, June.
  6. 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.
  7. Sakovics Jozsef, 1993. "Delay in Bargaining Games with Complete Information," Journal of Economic Theory, Elsevier, vol. 59(1), pages 78-95, February.
  8. repec:ner:tilbur:urn:nbn:nl:ui:12-154420 is not listed on IDEAS
  9. Ausubel, Lawrence M & Deneckere, Raymond J, 1992. "Bargaining and the Right to Remain Silent," Econometrica, Econometric Society, vol. 60(3), pages 597-625, May.
  10. Cho, In-Koo, 1990. "Uncertainty and Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 57(4), pages 575-95, October.
  11. Admati, Anat R & Perry, Motty, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 345-64, July.
  12. Peter Cramton, 1984. "Bargaining with Incomplete Information: An Infinite-Horizon Model with Two-Sided Uncertainty," Papers of Peter Cramton 84res, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
  13. Fudenberg, Drew & Tirole, Jean, 1983. "Sequential Bargaining with Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 50(2), pages 221-47, April.
  14. Gresik, Thomas A., 1996. "Incentive-Efficient Equilibria of Two-Party Sealed-Bid Bargaining Games," Journal of Economic Theory, Elsevier, vol. 68(1), pages 26-48, January.
  15. Satterthwaite, Mark A. & Williams, Steven R., 1989. "Bilateral trade with the sealed bid k-double auction: Existence and efficiency," Journal of Economic Theory, Elsevier, vol. 48(1), pages 107-133, June.
  16. Dilip Abreu & Faruk Gul, 2000. "Bargaining and Reputation," Econometrica, Econometric Society, vol. 68(1), pages 85-118, January.
  17. Clara PONSATI-OBIOLS, 1992. "Unique Equilibrium in a Model of Bargaining over Many Issues," Annales d'Economie et de Statistique, ENSAE, issue 25-26, pages 81-100.
  18. Leininger, W. & Linhart, P. B. & Radner, R., 1989. "Equilibria of the sealed-bid mechanism for bargaining with incomplete information," Journal of Economic Theory, Elsevier, vol. 48(1), pages 63-106, June.
  19. Ausubel, Lawrence M & Deneckere, Raymond J, 1992. "Durable Goods Monopoly with Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 795-812, October.
  20. Ausubel, Lawrence M & Deneckere, Raymond J, 1993. "Efficient Sequential Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 435-61, April.
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