Robust Predictions in Coasian Bargaining

Heng Liu

American Economic Review: Insights, 2022, vol. 4, issue 2, 209-22

Abstract: This paper studies robust predictions when players may have additional information in an otherwise standard seller-offer bargaining with private values. Players' extra information gives rise to higher-order uncertainties about the underlying surplus. We show that the equilibrium outcomes in the frequent-offer limit depend critically on the nature of second-order uncertainty: (i) when the seller's beliefs about the buyer's values are public, the limiting equilibrium outcomes are efficient and any surplus division is possible; (ii) when the seller's beliefs are private, any feasible and individually rational payoffs can be the limiting equilibrium payoffs.

JEL-codes: C78 D82 D83 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1257/aeri.20210144

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