Optimal Stalling While Bargaining

John Thanassoulis

No 224, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: 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.

Keywords: Bargaining; Delay; Optimal Stalling; Learning; Uncommon Priors (search for similar items in EconPapers)
JEL-codes: C73 C78 D83 (search for similar items in EconPapers)
Date: 2005-03-01
New Economics Papers: this item is included in nep-gth
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Citations: View citations in EconPapers (1)

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