The Perverse Effects of Outside Options on Strategic Delay in Bargaining

Abraham L. Wickelgren

Journal of Institutional and Theoretical Economics (JITE), 2009, vol. 165, issue 2, 210-229

Abstract: This paper shows that giving a player an outside option can worsen his payoff in a bargaining game with strategic delay. If the seller has the option to terminate bargaining and sell the good on the spot market, this can limit the ability of a low-valuation buyer to use delayed responses to signal her type. As a result, high-valuation buyers cannot immediately accept a seller´s offer with probability one, worsening the seller´s payoff.

JEL-codes: C78 D82 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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