Inefficient pre-bargaining search
We identify conditions under which a bargainer makes inefficiently large (small) investments in search for information about the opponent’s reservation price. The analysis starts with the observation that a player will invest too much (too little) if the opponent’s expected payoff is decreasing (...
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| Format: | Article |
| Language: | en_US |
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Mohr Siebeck
2011
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| Online Access: | http://hdl.handle.net/1721.1/67453 https://orcid.org/0000-0003-0009-6236 |
| Summary: | We identify conditions under which a bargainer makes inefficiently large (small)
investments in search for information about the opponent’s reservation price. The
analysis starts with the observation that a player will invest too much (too little) if the
opponent’s expected payoff is decreasing (increasing) in the probability that the player
gets information. We develop comparative static results about over- and underinvestment
as a function of the efficiency and distributional properties of mechanisms,
their dependence on search outcomes, and the nature of the trading problem. The results
do not depend on any specific bargaining mechanism and are illustrated in several
examples. |
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