An Offer You Can't Refuse: Early Contracting with Endogenous Threat

Bruno Jullien, Jerome Pouyet and Wilfried Sand-Zantman

No 13-415, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We analyze early contracting when a seller has private information on the future gains from trade and the buyer can bypass. Despite ex-post trade occurring under complete information and being efficient, early negotiation with an informed seller allows the uninformed buyer to improve her bargaining position. We show that the buyer can divide seller's types so that bypass becomes a credible threat. While some sellers accept because they gain more than by trading ex-post, others accept only because they fear that rejection would reveal too much information. Equilibrium payoffs are characterized and are shown to have a close connection with ratifiable equilibrium payoffs.

Date: 2013-05, Revised 2016-12
New Economics Papers: this item is included in nep-cta and nep-mic
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: An offer you can't refuse: early contracting with endogenous threat (2017)
Working Paper: An Offer You Can’t Refuse: Early Contracting with Endogenous Threat (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:27396

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