Optimal Stalling While Bargaining
Why do people stall while bargaining? Why are people keen to conclude a deal quickly, only to subsequently allow delay before the pie is realised? We propose that the reason is not fully explained by discount rates in combination with agents being engaged in a signalling equilibrium with asymmetric information. Rather we propose that stalling is explained by the fact that agents are worried about a rival coming to bargain for the pie and creating a bidding war - this encourages speedy agreement. The stalling arises when the beliefs as to how likely a rival is to come along differ as each agent waits for the other to update their beliefs and be more accommodating. The stalling region is shown to grow the thicker the market and the lower the discount rate. Thus, we give some predictive power to the new corpus of work on bargaining with uncommon priors.
|Date of creation:||01 Mar 2005|
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