Delay in Bargaining with Externalities

Jonas Björnerstedt () and Andreas Westermark
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Jonas Björnerstedt: Swedish Competition Authority, Postal: SE-103 85 Stockholm, Sweden

No 2006:29, Working Paper Series from Uppsala University, Department of Economics

Abstract: This paper studies infinite-horizon bargaining between a seller and multiple buyers when externalities are present. We extend the analysis in Jehiel & Moldovanu (1995a), by allowing for both pure and mixed equilibria. This extension is warranted, since under some circumstances,the complexity of the equilibria with bounded recall they analyze tend to infinity as players become very patient. We show that stationary subgame perfect equilibria always exist. Moreover, a characterization of the stationary subgame perfect equilibria in generic games is presented. Equilibria with delay exist only for strong positive externalities. Since ach buyer receives a positive payoff when the seller agrees with some other buyer, positive externalities induces a war of attrition between buyers. Furthermore, the results when analyzing mixed stationary equilibria are different than when focusing on pure strategies with bounded recall as Jehiel & Moldovanu (1995a). Specifically, they find delay only when externalities are negative.

Keywords: Bargaining; externalities; delay (search for similar items in EconPapers)
JEL-codes: C72 C78 D62 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006-11-24
New Economics Papers: this item is included in nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:uunewp:2006_029

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