IDEAS home Printed from https://ideas.repec.org/p/pen/papers/13-047.html
   My bibliography  Save this paper

Coasian Bargaining with An Arriving Outside Option

Author

Listed:
  • Ilwoo Hwang

    (Department of Economics, University of Pennsylvania)

  • Fei Li

    (Department of Economics, University of North Carolina Chapel Hill)

Abstract

We consider Coasian bargaining problems where the buyer has an outside option arriving at a stochastic time. We study both observable outside option models and unobservable outside option models. In both models, we show that a Coasian equilibrium exists if (1) the arrival of the outside option is public, or (2) the arrival of the outside option is private but the arrival probability is small enough. (1) the seller makes multiple rounds of offers, and (2) the Coase conjecture holds for an arbitrarily large arrival rate of the outside option. The result also applies to the time-varying outside option model. This exercise helps us to understand the sharp difference between Board and Pycia (2013), where the buyer's outside option is always available, and the standard Coasian bargaining literature, where the buyer has no outside option.

Suggested Citation

  • Ilwoo Hwang & Fei Li, 2013. "Coasian Bargaining with An Arriving Outside Option," PIER Working Paper Archive 13-047, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:13-047
    as

    Download full text from publisher

    File URL: https://economics.sas.upenn.edu/sites/default/files/filevault/13-047.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ilwoo Hwang, 2013. "A Theory of Bargaining Deadlock," PIER Working Paper Archive 13-050, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    2. Asher Wolinsky, 1986. "True Monopolistic Competition as a Result of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 493-511.
    3. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ilwoo Hwang, 2013. "A Theory of Bargaining Deadlock," PIER Working Paper Archive 13-050, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Moraga-González, José L. & Sándor, Zsolt & Wildenbeest, Matthijs R., 2014. "Prices, Product Differentiation, And Heterogeneous Search Costs," IESE Research Papers D/1097, IESE Business School.
    2. Andrew Rhodes & Jidong Zhou, 2019. "Consumer Search and Retail Market Structure," Management Science, INFORMS, vol. 67(6), pages 2607-2623, June.
    3. Armstrong, Mark & Zhou, Jidong, 2010. "Exploding offers and buy-now discounts," MPRA Paper 22531, University Library of Munich, Germany.
    4. Gamp, Tobias & Krähmer, Daniel, 2022. "Biased Beliefs in Search Markets," Rationality and Competition Discussion Paper Series 365, CRC TRR 190 Rationality and Competition.
    5. Ding, Yucheng & Zhang, Tianle, 2018. "Price-directed consumer search," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 106-135.
    6. Sviták, Jan & Tichem, Jan & Haasbeek, Stefan, 2021. "Price effects of search advertising restrictions," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    7. Yongmin Chen & Tianle Zhang, 2018. "Entry and Welfare in Search Markets," Economic Journal, Royal Economic Society, vol. 128(608), pages 55-80, February.
    8. Huanxing Yang, 2013. "Targeted search and the long tail effect," RAND Journal of Economics, RAND Corporation, vol. 44(4), pages 733-756, December.
    9. Atabek Atayev & Maarten Janssen, 2024. "Information Acquisition And Diffusion In Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 729-753, May.
    10. Petrikaitė, Vaiva, 2022. "Escaping search when buying," International Journal of Industrial Organization, Elsevier, vol. 82(C).
    11. José L Moraga-González & Zsolt Sándor & Matthijs R Wildenbeest, 2021. "Simultaneous Search for Differentiated Products: The Impact of Search Costs and Firm Prominence," The Economic Journal, Royal Economic Society, vol. 131(635), pages 1308-1330.
    12. Sarah Auster & Nenad Kos & Salvatore Piccolo, 2021. "Optimal Pricing, Private Information and Search For an Outside Offer," CRC TR 224 Discussion Paper Series crctr224_2021_151v2, University of Bonn and University of Mannheim, Germany.
    13. Matthijs R. Wildenbeest, 2011. "An empirical model of search with vertically differentiated products," RAND Journal of Economics, RAND Corporation, vol. 42(4), pages 729-757, December.
    14. Daniel Garcia & Jun Honda & Maarten Janssen, 2017. "The Double Diamond Paradox," American Economic Journal: Microeconomics, American Economic Association, vol. 9(3), pages 63-99, August.
    15. Simon P. Anderson & Régis Renault, 2006. "Advertising Content," American Economic Review, American Economic Association, vol. 96(1), pages 93-113, March.
    16. Fishman, Arthur, 2021. "Finitely repeated search and the diamond paradox," Economics Letters, Elsevier, vol. 205(C).
    17. Petrikaitė, Vaiva, 2016. "Collusion with costly consumer search," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 1-10.
    18. Volker Nocke & Patrick Rey, 2024. "Consumer Search, Steering, and Choice Overload," Journal of Political Economy, University of Chicago Press, vol. 132(5), pages 1684-1739.
    19. Janssen, Maarten C.W. & Parakhonyak, Alexei & Parakhonyak, Anastasia, 2017. "Non-reservation price equilibria and consumer search," Journal of Economic Theory, Elsevier, vol. 172(C), pages 120-162.
    20. Michael R. Galbreth & Bikram Ghosh, 2020. "The effect of exogenous product familiarity on endogenous consumer search," Quantitative Marketing and Economics (QME), Springer, vol. 18(2), pages 195-235, June.

    More about this item

    Keywords

    Bargaining; Arriving Outside Option; Dynamic Games; Coase Conjecture;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pen:papers:13-047. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Administrator (email available below). General contact details of provider: https://edirc.repec.org/data/deupaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.