Economics at your fingertips  

No compromise: Uncertain costs in reputational bargaining

Jack Fanning

Journal of Economic Theory, 2018, vol. 175, issue C, 518-555

Abstract: I show how uncertainty about agents' future costs of delay can lead to substantial bargaining delays when agents have reputational concerns. Reputational concerns arise because with positive probability agents are behavioral types, committed to demanding a fixed share of the surplus. In equilibrium, rational agents may demand almost the entire surplus and then wait, with the deadlock only broken by the arrival of news about future costs, even as the probability of behavioral types vanishes. Although both agents would benefit from a compromise reached immediately, they do not propose such agreements, because doing so would increase an opponent's option value of waiting.

Keywords: Bargaining; Reputation; Uncertainty; Delay; Option values (search for similar items in EconPapers)
JEL-codes: C78 D82 D83 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2018-06-02
Handle: RePEc:eee:jetheo:v:175:y:2018:i:c:p:518-555