Cyclical Delay in Bargaining with Externalities

Philippe Jehiel () and Benny Moldovanu ()

The Review of Economic Studies, 1995, vol. 62, issue 4, 619-637

Abstract: Externalities between buyers are shown to induce delays in negotiations between a seller and several buyers. Delays arise in a perfect and complete information setting with random matching even when there is no deadline. While with a deadline we identify delays both for positive and negative externalities, without a deadline we find that (1) when externalities are positive, there exists no SPNE in pure strategies with bounded recall that exhibits delay; (2) when externalities are negative, it may happen that all SPNE with bounded recall have the property that long periods of waiting alternate with short periods of activity: This is the cyclical delay phenomenon.

Date: 1995
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