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Optimal deadlines for agreements

Listed author(s):
  • Wing Suen

    (The University of Hong Kong)

  • Hao Li

    (University of Toronto)

  • Ettore Damiano

    (University of Toronto)

We provide a welfare analysis of the deadline effect in a repeated negotiation game in which costly delay can produce information that improves the quality of the decision. We characterize equilibrium strategies and the evolution of beliefs in continuous time, and study how the length of the negotiation horizon affects players’ behavior and welfare. The optimal deadline is positive if and only if the ex ante probability that the players disagree on the preferred decision is neither too high nor too low. When it is positive, the optimal deadline is given by the shortest time that would allow efficient information aggregation in equilibrium, which is increasing in the ex ante probability of disagreement and is finitely long.

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File URL: https://economicdynamics.org/meetpapers/2010/paper_855.pdf
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Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 855.

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Date of creation: 2010
Handle: RePEc:red:sed010:855
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  2. Ettore Damiano & Hao Li & Wing Suen, 2008. "Delay in Strategic Information Aggregation," Working Papers tecipa-311, University of Toronto, Department of Economics.
  3. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September.
  4. Ponsati, Clara, 1995. "The deadline effect: A theoretical note," Economics Letters, Elsevier, vol. 48(3-4), pages 281-285, June.
  5. Jarque, Xavier & Ponsati, Clara & Sakovics, Jozsef, 2003. "Mediation: incomplete information bargaining with filtered communication," Journal of Mathematical Economics, Elsevier, vol. 39(7), pages 803-830, September.
  6. Fershtman Chaim & Seidmann Daniel J., 1993. "Deadline Effects and Inefficient Delay in Bargaining with Endogenous Commitment," Journal of Economic Theory, Elsevier, vol. 60(2), pages 306-321, August.
  7. Hao Li & Sherwin Rosen & Wing Suen, 2001. "Conflicts and Common Interests in Committees," American Economic Review, American Economic Association, vol. 91(5), pages 1478-1497, December.
  8. Ma, Ching-To Albert & Manove, Michael, 1993. "Bargaining with Deadlines and Imperfect Player Control," Econometrica, Econometric Society, vol. 61(6), pages 1313-1339, November.
  9. Anat R. Admati & Motty Perry, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 345-364.
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