The Bargaining Trap

Sebastian Schweighofer-Kodritsch
Additional contact information
Sebastian Schweighofer-Kodritsch: HU Berlin

No 308, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: I revisit the Rubinstein (1982) model for the classic problem of price haggling and show that bargaining can become a “trap,” where equilibrium leaves one party strictly worse off than if no transaction took place (e.g., the equilibrium price exceeds a buyer’s valuation). This arises when one party is impatient about capturing zero surplus (e.g., Rubinstein’s example of fixed bargaining costs). Augmenting the protocol with unilateral exit options for responding bargainers generally removes the trap.

Keywords: alternating offers; bargaining; time preferences; haggling costs; outside options (search for similar items in EconPapers)
JEL-codes: C78 D03 D74 (search for similar items in EconPapers)
Date: 2021-12-27
New Economics Papers: this item is included in nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://rationality-and-competition.de/wp-content/uploads/2021/12/308.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rco:dpaper:308

Access Statistics for this paper

More papers in Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition
Bibliographic data for series maintained by Viviana Lalli ().