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Alternating offer bargaining with endogenous information : timing and surplus division

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  • Dang, Tri Vi

Abstract

Two ex ante identically informed agents play a two-period alternating offer bargaining game over the division of a known surplus with endogenous information and common values. This paper shows that a low discounting of trading surplus, a positive externality of information acquisition and an endogenous lemons problem can cause delay of agreement. In the period of disagreement the buyer and the seller have symmetric information. For the case where the discount factor d of trading surplus is zero, a perfect equilibrium exists in which the responder captures full surplus in take-it-or-leave-it offer bargaining. The equilibrium payoff of the first period proposer can increase with d, the bargaining power of the counter party.

Suggested Citation

  • Dang, Tri Vi, 2005. "Alternating offer bargaining with endogenous information : timing and surplus division," Papers 05-39, Sonderforschungsbreich 504.
    • Handle: RePEc:mnh:spaper:2622
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    File URL: https://madoc.bib.uni-mannheim.de/2622/1/dp05_39.pdf
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    References listed on IDEAS

    as
    1. Joel Watson, 1998. "Alternating-Offer Bargaining with Two-Sided Incomplete Information," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(3), pages 573-594.
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    More about this item

    Keywords

    bargaining ; delay ; endogenous lemons problem ; endogenous outside option ; information acquisition;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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