Revealing Private Information in Bargaining

Gayer Gabrielle () and Segev Ella ()
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Gayer Gabrielle: Ilan University
Segev Ella: Ben-Gurion University of the Negev

The B.E. Journal of Theoretical Economics, 2012, vol. 12, issue 1, 34

Abstract: It is well known that bargaining with incomplete information incurs a substantial amount of inefficiency. We consider a bargaining procedure in which the seller makes a "take-it-or-leave-it" offer to a buyer. An initial stage in which the buyer is permitted to convey information to the seller is introduced into this framework. The decision regarding what information will be conveyed is made before the buyer knows his exact valuation. We study the type of information the buyer would be willing to transmit to the seller. The analysis determines that buyers with low valuations, in effect, reveal their valuations whereas buyers with high valuations conceal them. Communication between buyer and seller before the bargaining process begins improves both the overall efficiency of the process as well as the welfare of both buyer and seller.

Keywords: “take it or leave it” bargaining; conveying information; information structures; efficiency (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1515/1935-1704.1918

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