Incomplete Information and Delay in Bargaining

Basak, D (2016) Incomplete Information and Delay in Bargaining. PhD thesis, New York University.

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This thesis studies the canonical bilateral bargaining game. Each agent has a reservation value and accepts nothing below this reservation value. There is uncertainty regarding whether the reservation value is high or low. Each agent attempts to convince the other that he has a high reservation value. This results in delay, even when offers can be made frequently. Unlike the existing literature on two sided incomplete information bargaining, a unique war of attrition equilibrium emerges, similar to the reputational bargaining literature. I assume that agents receive some noisy information about their opponent’s reservation value at the beginning of the game. This information can be public or private. As this information becomes almost fully accurate, there is no delay. However, higher accuracy does not necessarily reduce delay. I consider noisy public information and show that there is more delay when agents have somewhat accurate information as opposed to having no information. I consider a mediator who can control this public information and characterize the optimal information disclosure. If the information is private, then there is higher order uncertainty. In equilibrium, the time of concession depends on an agent’s type. A more optimistic type concedes later. I consider the asymmetric limiting case in which an agent receives almost accurate information while his opponent does not. Similar to Coase conjecture, there is no delay. However, if there is a positive probability that the opponent knows that the agent has low reservation value, there can be delay.

Item Type: Thesis (PhD)
Additional Information: The research paper was published by the author with the affiliation of New York University.
Subjects: Economics
Depositing User: Veeramani R
Date Deposited: 15 May 2019 16:11
Last Modified: 15 May 2019 16:11