TY - JOUR
T1 - Bargaining With Two-Sided Incomplete Information
T2 - An Infinite Horizon Model With Alternating Offers
AU - Chatterjee, Kalyan
AU - Samuelson, Larry
N1 - Funding Information:
Acknowledgement We are thankful to the National Science Foundation for financial support under Grants IST-8406296, SES-8420486, and SES-8608118 and to the referees of this journal for helpful comments. We also wish to acknowledge several very helpful conversations with Andrew Postlewaite; in particular, example 4 derives from a slightly different example he and David Schmeidler proposed.
PY - 1987/4
Y1 - 1987/4
N2 - This paper examines an infinite horizon bargaining model, incorporating five features: two-sided incomplete information (with potentially information-revealing strategies), an infinite horizon, uncertainty concerning the potential gains from trade, an illumination of interesting qualitative bargaining issues, and plausible (free from arbitrarily specified out-of-equilibrium conjectures) equilibria. These features, motivated in the paper, have powerful implications. A Nash equilibrium exists, and is genetically both unique and sequential. Comparative static implications of variations in the game’s specifications are developed. We find that natural indications of bargaining strength emerge from the model, and establish the intuitive result that an increase in a player’s relative bargaining strength makes that player more likely to capture the gains from bargaining.
AB - This paper examines an infinite horizon bargaining model, incorporating five features: two-sided incomplete information (with potentially information-revealing strategies), an infinite horizon, uncertainty concerning the potential gains from trade, an illumination of interesting qualitative bargaining issues, and plausible (free from arbitrarily specified out-of-equilibrium conjectures) equilibria. These features, motivated in the paper, have powerful implications. A Nash equilibrium exists, and is genetically both unique and sequential. Comparative static implications of variations in the game’s specifications are developed. We find that natural indications of bargaining strength emerge from the model, and establish the intuitive result that an increase in a player’s relative bargaining strength makes that player more likely to capture the gains from bargaining.
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U2 - 10.2307/2297511
DO - 10.2307/2297511
M3 - Article
AN - SCOPUS:84930206792
VL - 54
SP - 193
EP - 208
JO - Review of Economic Studies
JF - Review of Economic Studies
SN - 0034-6527
IS - 2
ER -