Social Value of Public Information in Bargaining

Deepal Basak

The Economic Journal, 2024, vol. 134, issue 660, 1356-1378

Abstract: We consider a bargaining game in which both sides are uncertain about their opponent’s commitment, which leads to delay and welfare loss in equilibrium. We address the following question: does ex ante better public information about a player improve expected social welfare? We show that if the information cannot turn the bargaining table (turns the weak bargainer into a strong one and vice versa), more information does not help. More information about a weak bargainer has zero impact, whereas that about the strong bargainer is strictly detrimental. Moreover, by specialising in a binary signal structure, we show that if the information is more accurate in every state, it improves social welfare when it can turn the table.

Date: 2024
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