Bargaining with Interdependent Values
A seller and a buyer bargain over the terms of trade for an object. The seller receives a perfect signal determining the value of the object to both players, while the buyer remains uninformed. We analyze the infinite horizon bargaining game in which the buyer makes all the offers. When the static incentive constraints permit first-best efficiency, then under some regularity conditions the outcome of the sequential bargaining game becomes arbitrarily efficient as bargaining frictions vanish. When the static incentive constraints preclude first-best efficiency, the limiting bargaining outcome is not second-best efficient, and may even perform worse than the outcome from the one-period bargaining game. With frequent buyer offers, the outcome is then characterized by recurring bursts of high probability of agreement, followed by long periods of delay in which the probability of agreement is negligible.
|Date of creation:||Jun 2001|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, Reference Centre, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2|
Phone: 519-661-2111 Ext.85244
Web page: http://economics.uwo.ca/research/research_papers/department_working_papers.html
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dov Samet, 1994.
"Hypothetical Knowledge and Games with Perfect Information,"
Game Theory and Information
9408001, EconWPA, revised 17 Aug 1994.
- Samet, Dov, 1996. "Hypothetical Knowledge and Games with Perfect Information," Games and Economic Behavior, Elsevier, vol. 17(2), pages 230-251, December.
- Peter Cramton & Joseph S. Tracy, 1992.
"Strikes and Holdouts in Wage Bargaining: Theory and Data,"
Papers of Peter Cramton
92aer, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
- Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, vol. 82(1), pages 100-121, March.
- Ausubel, Lawrence M & Deneckere, Raymond J, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Econometrica, Econometric Society, vol. 57(3), pages 511-31, May.
- Samuelson, William F, 1984. "Bargaining under Asymmetric Information," Econometrica, Econometric Society, vol. 52(4), pages 995-1005, July.
- D. Abreu & F. Gul, 1998.
"Bargaining and Reputation,"
Princeton Economic Theory Papers
00s9, Economics Department, Princeton University.
- Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
- Roger B. Myerson & Mark A. Satterthwaite, 1981.
"Efficient Mechanisms for Bilateral Trading,"
469S, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
- Ausubel, Lawrence M & Deneckere, Raymond J, 1993. "A Generalized Theorem of the Maximum," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(1), pages 99-107, January.
- Faruk Gul & Hugo Sonnenschein & Robert Wilson, 2010.
"Foundations of Dynamic Monopoly and the Coase Conjecture,"
Levine's Working Paper Archive
232, David K. Levine.
- Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June.
- Roger B. Myerson, 1983. "Analysis of Two Bargaining Problems with Incomplete Information," Discussion Papers 582, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- P. Reny, 2010.
"Common Belief and the Theory of Games with Perfect Information,"
Levine's Working Paper Archive
386, David K. Levine.
- Reny Philip J., 1993. "Common Belief and the Theory of Games with Perfect Information," Journal of Economic Theory, Elsevier, vol. 59(2), pages 257-274, April.
- Robert Evans, 1989. "Sequential Bargaining with Correlated Values," Review of Economic Studies, Oxford University Press, vol. 56(4), pages 499-510.
- Larry M. Ausubel & Raymond J. Deneckere, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Levine's Working Paper Archive 201, David K. Levine.
- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
- Rosenthal, Robert W., 1981. "Games of perfect information, predatory pricing and the chain-store paradox," Journal of Economic Theory, Elsevier, vol. 25(1), pages 92-100, August.
- Neelin, Janet & Sonnenschein, Hugo & Spiegel, Matthew, 1988. "A Further Test of Noncooperative Bargaining Theory: Comment," American Economic Review, American Economic Association, vol. 78(4), pages 824-36, September.
When requesting a correction, please mention this item's handle: RePEc:uwo:uwowop:20017. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.