Bargaining with a possibly committed seller |
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Authors: | Roman Inderst |
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Affiliation: | London School of Economics, Department of Economics, Houghton Street, London WC2A 2AE, UK;INSEAD, CEPR |
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Abstract: | We consider negotiations with an open time horizon where a buyer has private information about his valuation and does not know whether the seller is committed to the advertised price. This setting combines two common specifications made in the non-cooperative bargaining literature: one side is privately informed about its valuation, which is drawn from a continuum, and the other side is possibly committed to a fixed offer. We analyze the game both in discrete and in continuous time and show convergence of the two settings, which extends results from Abreu and Gul [2000. Bargaining and reputation. Econometrica 68, 85–117]. One interesting result is that as time proceeds, the non-committed seller becomes less likely to concede in a given period, i.e., it appears as if he becomes more “stubborn.” We further show that a seller may prefer to negotiate with a “worse” buyer as this enhances the value of his possible commitment. |
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Keywords: | Bargaining Commitment Coase conjecture |
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