Buying the Option to say "No"
We analyze a simple model of bilateral bargaining under asymmetric information where the seller of an object can not simply say "no" by default to a buyer who is supposed to make a take-it-or-leave-it offer. Rather, he must acquire this option before the actual bargaining process begins. T...
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| Format: | workingPaper |
| Language: | eng |
| Published: |
2019
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| Online Access: | http://hdl.handle.net/10362/83628 |
| Country: | Portugal |
| Oai: | oai:run.unl.pt:10362/83628 |
| Summary: | We analyze a simple model of bilateral bargaining under asymmetric information where the seller of an object can not simply say "no" by default to a buyer who is supposed to make a take-it-or-leave-it offer. Rather, he must acquire this option before the actual bargaining process begins. This choice is observable to the buyer, and hence, the seller's pre-bargaining action might signal private information. We develop a complete characterization of Perfect Bayesian Equilibrium in pure and (strictly) mixed strategies for this game. Then the model is compared to a standard bargaining setting in terms of the realization of welfare enhancing property-right changes. |
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