Multidimensional Bargaining under Asymmetric Information

Arijit Sen

International Economic Review, 2000, vol. 41, issue 2, 425-50

Abstract: A buyer with private information regarding marginal valuation bargains with a seller to determine price and quantity of trade. Depending on parameter values, a high-valuation buyer wants either to reveal information to create value or to conceal it to capture value. In the first case, equilibrium trades are efficient. In the second case, the low-valuation buyer purchases less than her efficient quantity, and there can be a one-period delay in trade. The quantity distortion is the only inefficiency that persists when time between offers approaches zero. There exist equilibria that are independent of the seller's prior beliefs. Copyright 2000 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 2000
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