Alternating offer bargaining with endogenous information: timing and surplus division

Tri Vi Dang

No 05-39, Papers from Sonderforschungsbreich 504

Abstract: Two ex ante identically informed agents play a two-period alternating offer bargaining game over the division of a known surplus with endogenous information and common values. This paper shows that a low discounting of trading surplus, a positive externality of information acquisition and an endogenous lemons problem can cause delay of agreement. In the period of disagreement the buyer and the seller have symmetric information. For the case where the discount factor d of trading surplus is zero, a perfect equilibrium exists in which the responder captures full surplus in take-it-or-leave-it offer bargaining. The equilibrium payoff of the first period proposer can increase with d, the bargaining power of the counter party.

Keywords: bargaining; delay; endogenous lemons problem; endogenous outside option; information acquisition (search for similar items in EconPapers)
JEL-codes: C78 D82 D83 (search for similar items in EconPapers)
Date: 2005
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