Dynamic Bargaining with Transaction Costs

Peter Cramton

Management Science, 1991, vol. 37, issue 10, 1221-1233

Abstract: A buyer and seller alternate making offers until an offer is accepted or someone terminates negotiations. The seller's valuation is common knowledge, but the buyer's valuation is known only by the buyer. Impatience to reach an agreement comes from two sources: the traders discount future payoffs and there are transaction costs of bargaining. Equilibrium behavior involves either immediate trade, delayed trade, or immediate termination, depending on the size of the gains from trade and the relative bargaining costs. This contrasts with the pure discounting model where termination never occurs, and the pure transaction cost model where delayed trade never occurs.

Keywords: bargaining; negotiation; delay; signalling games; transaction costs (search for similar items in EconPapers)
Date: 1991
References: Add references at CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.37.10.1221 (application/pdf)

Related works:
Working Paper: Dynamic Bargaining with Transaction Costs (1998)
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: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:37:y:1991:i:10:p:1221-1233

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().