The Role of Strategic Information Transmission in a Bargaining Model

Jane M Black and George Bulkley ()

Economic Journal, 1987, vol. 98, issue 390, 50-57

Abstract: Although uncertainty about opponents' valuations can result in ineffici ent outcomes in bargaining models, it may not be in the private inter est of either party to reveal their valuation to the other. It is sho wn that if each can send a verifiable signal, which partially reveals their valuations, then efficient trade is possible if optimal signal s, characterized in the paper, are used. Under two-sided uncertainty, both parties share in the increased joint surplus which results from this communication. A mediator may be able to play a role in constru cting optimal signals. Copyright 1987 by Royal Economic Society.

Date: 1987
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