The Role of Commitment in Bilateral Trade

Dino Gerardi, Johannes Hörner and Lucas Maestri

No 1760, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We examine the buyer-seller problem under different levels of commitment. The seller is informed of the quality of the good, which affects both his cost and the buyer’s valuation, but the buyer is not. We characterize the allocations that can be achieved through mechanisms in which, unlike with full commitment, the buyer has the option to "walk away" after observing a given offer. We further characterize the equilibrium payoffs that can be achieved in the bargaining game in which the seller makes all the offers, as the discount factor goes to one. This allows us to identify how different levels of commitment affect outcomes, and which constraints, if any, preclude efficiency.

Keywords: Bargaining; Mechanism design; Market for lemons (search for similar items in EconPapers)
JEL-codes: C70 C78 D82 (search for similar items in EconPapers)
Pages: 77 pages
Date: 2010-05
New Economics Papers: this item is included in nep-cta
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://cowles.yale.edu/sites/default/files/files/pub/d17/d1760.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: The role of commitment in bilateral trade (2014)
Working Paper: The Role of Commitment in Bilateral Trade (2014)
Working Paper: The Role of Commitment in Bilateral Trade (2013)
Working Paper: The Role of Commitment in Bilateral Trade (2010)
Working Paper: The Role of Commitment in Bilateral Trade (2010)
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:cwl:cwldpp:1760

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Brittany Ladd ().