Separating equilibria in a continuous-time bargaining model with two-sided uncertainty

Ruqu Wang ()

International Journal of Game Theory, 2000, vol. 29, issue 2, 229-240

Abstract: In this paper, we analyze the class of all smooth separating sequential equilibria in a continuous-time bargaining model with two-sided uncertainty. Trade between players occurs whenever there is surplus to be shared and delay is used to signal their valuations. When the buyer and the seller have a common discount rate, we show that the final outcome is unique among all these equilibria: the difference between the highest possible buyer's valuation and the lowest possible seller's valuation always narrows down at a rate exactly equal to the discount rate. When their discount rates differ, the more patient side always reveals his valuation first in the unique smooth separating equilibrium.

Keywords: Bargaining; ·; signaling; ·; delay; ·; two-sided; uncertainty (search for similar items in EconPapers)
Date: 2000-07-12
Note: Received: November 1997/Final version: December 1999
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