efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

sequential negotiations with loss averse buyers abstract this paper analyzes sequential negotiations with exogenous breakdown risk between a risk neutral seller and a loss averse buyer who is privately informed about his valuation i show that compared to the risk neutral benchmark loss aversion on the buyer s side softens the rent efficiency trade off for the seller the reason is that the higher the buyer s valuation is the more he has to lose by rejecting the seller s offer thus in equilibrium the seller s profits and overall efficiency are both higher than in the risk neutral case moreover i also show that loss aversion has a redistributive effect by increasing the equilibrium payoff of some low valuation buyers and decreasing that of high valuation ones

bargaining over reform abstract this paper models the delay in a macroeconomic stabilization as the outcome of a bargaining game between two parties who must reach an agreement over how the stabilization cost is to be shared the paper modifies alesina and drazen s 1991 american economic review 81 1170 1189 war of attrition model by endogenizing the distribution of the stabilization costs through a bargaining game using this bargaining framework the paper analyzes the role of crises and foreign assistance in bringing about a settlement to the distributional conflict in the bargaining game a crisis that increases the welfare loss from not stabilizing the economy will lower the probability of delay in contrast foreign aid that is used to reduce the stabilization costs will further increase the delay in reaching an agreement between the two parties

bargaining search and outside options abstract this paper studies a two sided incomplete information bargaining model between a seller and a buyer the buyer has an outside option which is modeled as a sequential search process during which he can choose to return to bargaining at any time two cases are considered in regime i both agents have symmetric information about the search parameters we find that in contrast to bargaining with complete information the option to return to bargaining is not redundant in equilibrium however the no delay result still holds in regime ii where agents have asymmetric information about the outside option delay is possible the solution characterizes the parameters for renegotiation and those for search with no return to the bargaining table

some recent results in bargaining theory two person bargaining situations are very frequent in economic life among the most natural examples one can think of wage negotiations between an employer and a person he wishes to hire another example at a more aggregate level concerns wage renegotiations that take place periodically in large firms between the manager and the workers representative as a final example let me mention the simple and very usual situation of a seller and a potential buyer who bargain over the price of some indivisible object unlike for competitive markets economic theory and especially mathematical economics has not until recently been very helpful in explaining how prices are determined in these bargaining situations the usual explanations refer to a vague notion of respective bargaining powers of the two agents there is a clear need to precise the relations between this mysterious notion and quantifiable economic data like preferences what bargainers can get in case of an agreement outside options what they can get if agreement fails impatience risk aversion and finally information of bargainers about each other after the seminal contributions of hicks and zeuthen in the thirties john nash 1950 1953 was the first to adopt in the early fifties a systematic theoretical approach to the bargaining problem nash introduced a distinction between the axiomatic or normative approach on the one hand and the strategic or positive approach on the other hand of course the two approaches must not be viewed as independent what has come to be known as the nash program can be described as follows starting from an axiomatic solution having desirable normative properties like the solution proposed by nash himself is it possible to design a particular bargaining process that would naturally lead rational negotiators to the outcome prescribed by the axiomatic solution behind the word rational hides the main difficulty of this program find a satisfactory concept of non cooperative equilibrium for bargaining games

hospital systems and bargaining power evidence from out of market acquisitions competition analyses generally restrict their attention to how mergers alter concentration in the relevant consumer market studying hospital competition by focusing on the local patient market may be misleading however as multi market hospital systems often play an important role in the price negotiations of their members with managed care organizations we focus on out of market hospital mergers to investigate the cross market effects of system membership on member hospital reimbursement rates based on acquisitions occurring across the united states during 2000 2008 we find that hospitals exhibit significant increases of around 14 in their net reimbursement rates after becoming affiliated with an out of market system compared to independent stand alone hospitals we find no evidence that the price effect results from changes in patient case mix the cost of providing care generally or hospital quality the findings reveal that systems can impact the market power of hospitals in ways that have not been considered in recent antitrust analysis

bargaining and strikes strikes are generally regarded as an important economic phenomenon and yet good theoretical explanations of them are hard to come by the difficulty is to understand why rational parties should resort to a wasteful mechanism as a way of distributing the gains from trade why could not both parties be made better off by moving to the final distribution of surplus immediately or if it is uncertain to its certainty equivalent and sharing the benefits from increased production

equilibrium in a durable goods market with lumpy adjustment abstract durable goods are an important component of the business cycle equilibrium models of durable goods markets are made difficult by the lumpy nature of individual purchases we show that a straightforward approximation of the distribution of durable goods holdings gives rise to a tractable equilibrium model we analyze the case of competition as well as that of a monopoly producer

an alternative solution to rubinstein s model of sequential bargaining under incomplete information there has been much recent work on sequential bargaining of particular interest is rubinstein s 1982 bargaining model in which two players who are completely informed about one another bargain over how to share a resource of size one it is a corollary of rubinstein s 1982 results that for two examples of players preferences the case of discounting and that of constant costs there is a unique perfect equilibrium in his model in real bargaining however players are likely to be uncertain of one another s preferences rubinstein 1983 analyses a version of his 1982 model in which one player is uncertain whether his opponent is a tough or a soft bargainer using kreps and wilson s 1982 notion of sequential equilibrium as his solution concept he finds that even for the two cases of preferences that i have mentioned there is a great multiplicity of sequential equilibria from this multiplicity he selects one by imposing four rather ad hoc assumptions the principal purpose of the present paper is to explore the alternative solution to rubinstein s 1983 model that is obtained using hammond s 1982 notion of sophisticated dynamic equilibrium let p be the probability with which the player of unknown type is tough i show that there exist p and p 1 f p 0 such that for all p f there is a unique pooling equilibrium and for all p p p one of which is pooling and the other of which is separating these results contrast strikingly with the non uniqueness of sequential equilibrium demonstrated by rubinstein 1983 section i discusses rubinstein s 1983 work in terms of the case of discounting since his analysis does not cover the case of constant costs and since the case of discounting is anyway the easiest to discuss informally section ii describes sophisticated dynamic equilibrium section iii analyses sophisticated dynamic equilibrium in rubinstein s 1983 model for the case of constant costs since this case is the easiest to handle rigorously and since considerations of space preclude the lengthier analysis needed for the case of discounting

optimal selling strategies when to haggle when to hold firm a seller encountering risk neutral buyers one at a time should if commitments are feasible quote a single take it or leave it price to each this strategy is superior to any other for finite or infinite buyer populations whether there is learning or the distribution of buyer prices is known at the outset with one object for sale or many although haggling may offer advantages in terms of price discrimination these gains are more than offset by the losses it generates by encouraging buyers to refuse purchases at high prices

firm specific training layoffs and unreliable workers firm specific training layoffs and unreliable workers 1 introduction early work in implicit contract theory argues that a long term relationship between a worker and a firm evolves due to the risk sharing nature of the implicit contract between a risk averse worker and a risk neutral firm some authors have criticized this initial argument see for example haltiwanger 1983 feeling that a long term relationship between a worker and a firm and the terms of an implicit contract between the two in large parts is explained via hiring costs training costs and the like this is the approach taken in the early work of becker 1975 oi 1962 and the most recent work of jovanovic 1979a these latter explanations are also appealing because long term relations between a worker and a firm are typically characterized by quits that decline with tenure and wages that increase with tenure as discussed in mortensen 1988 explanations of these phenomena fall into two categories job search theories or job training theories job search theories stress that there is a match specific component to the productivity of any worker firm match that a good match will result in a long term relationship explains why wages are positively correlated with tenure to explain a rising wage profile within a given match requires that the firm and the worker learn about the quality of their match over time a good match will be a long term one and the wage will rise over time as the match is discovered to be a good one jovanovic 1979b and barron and loewenstein 1985 model such a learning process job training theories maintain that long term relationships with rising wages exist because of firm specific training that increases with tenure again see jovanovic 1979a as an example this paper integrates these two theories in this paper firm specific training evolves as an increasing function of a worker s tenure with a firm this is so because there is a positive probability that a worker is unreliable in that he will be searching for another employer the firm being unable to identify in advance which workers are unreliable will update its prior belief as to a worker s reliability as a function of the worker s tenure the total level of training at any point in time will be an increasing function of this updated belief thus learning about the quality of a match an aspect of the job search theories plays an important role in explaining the level of firm specific training this learning process can also play a role in determining optimal layoffs if an unreliable worker is more likely to receive an acceptable outside offer when the worker is laid off than when he is employed the firm can use layoffs to elicit information about the worker s reliabiliy based upon this fact layoffs may occur even when the worker s marginal product exceeds his value of leisure before discussing the model in detail one crucial assumption deserves comment unlike previous work such a salop and salop 1976 enforceable self revealing contracts are ruled out by assumption thus the firm here cannot commit itself to a wage contract promising low wages initially in exchange for high wages as job tenure increases which contract would attract only reliable workers this assumption is of course a polar extreme but as such is consistent with more recent work in contract theory which investigates the terms of self enforcing contracts see for example holmstrom 1983 the idea is to provide a comparison with contracts in an idealized economy with no enforcement problems this assumption is justified if the cost of writing a legally enforceable contract is prohibitive or if as suggested in charmichael 1984 reputational forces are insufficient to deter a firm from cheating although workers here are risk neutral the model could be amended to include risk averse agents

dynamic bargaining with transaction costs a buyer and seller alternate making offers until an offer is accepted or someone terminates negotiations the seller s valuation is common knowledge but the buyer s valuation is known only by the buyer impatience to reach an agreement comes from two sources the traders discount future payoffs and there are transaction costs of bargaining equilibrium behavior involves either immediate trade delayed trade or immediate termination depending on the size of the gains from trade and the relative bargaining costs this contrasts with the pure discounting model where termination never occurs and the pure transaction cost model where delayed trade never occurs

monopoly pricing with network externalities abstract how should a monopolist price a durable good or a new technology that is subject to network externalities in particular should the monopolist set a low introductory price to attract a critical mass of adopters in this paper we provide intuition as to when and why introductory pricing might occur in the presence of network externalities incomplete information about demand or asymmetric information about costs is necessary for introductory pricing to occur in equilibrium when consumers are small

bargaining and search with recall a two period model with complete information two standard results of previous bargaining models state that delay is generally not expected to occur under complete information and bargaining outcome depends crucially on the bargainers intrinsic characteristics that determine their reservation prices and in general bargainers with better reservation prices tend to get better outcomes this paper considers a bilateral bargaining problem with complete information in which one of the bargainers the buyer is allowed to search while bargaining more importantly we assume that the buyer is allowed to recall past outside offers we find that quite contrary to the standard results of previous complete information bargaining models complete information renders no guarantee for immediate resolution of bargaining and the effect of changing the buyer s search cost on each player s bargaining outcome is unpredictable the major driving force of these two results is the assumption that the buyer can recall past outside offers

measuring time varying financial market integration an unobserved components approach abstract we measure the time varying degree of world stock market integration of five developed countries germany france uk us and japan over the period 1970 1 2011 10 time varying financial market integration of each country is measured through the conditional variances of the country specific and common international risk premiums in equity excess returns the country specific and common risk premiums and their conditional variances are estimated from a latent factor decomposition through the use of state space methods that allow for garch errors our empirical results suggest that stock market integration has increased over the period 1970 1 2011 10 in all countries but japan and while there is a structural increase in stock market integration in four out of five countries all countries also exhibit several shorter periods of disintegration reversals i e periods in which country specific shocks play a more dominant role hence stock market integration is measured as a dynamic process that is fluctuating in the short run while gradually increasing in the long run

contract negotiation and the coase conjecture a strategic foundation for renegotiation proof contracts what does contract negotiation look like when some parties hold private information and negotiation frictions are negligible this paper analyzes this question and provides a foundation for renegotiation proof contracts in this environment the model extends the framework of the coase conjecture to situations in which the quantity or quality of the good is endogenously determined and to more general environments in which preferences are nonseparable in the traded goods as frictions become negligible all equilibria converge to a unique outcome which is separating efficient and straightforward to characterize

durable services monopolists do better than durable goods monopolists the authors consider a monopolist who can commit to a price path when selling a good for which individual consumers demand at most one unit only if the monopolist can also commit to destroying unpurchased stock and the timing of stock release can she earn more than a static monopolist this additional commitment power has empirical revelance for a wide range of goods that the authors term durable services the inability to store output facilitates price discrimination by a durable services monopolist by permitting the credible threat of rationing the authors detail sufficient conditions for a durable services monopolist to produce more than a static or durable goods monopolist produces

purchasing power parity in the long run a test of the dollar pound exchange rate 1890 1978 this paper tests the purchasing power parity ppp hypothesis by analyzing t he long run tendency of the dollar pound exchange rate using data sin ce 1890 two different models are considered 1 a na ive model and 2 a modified monetary model the conditions of propor tionality and symmetry cannot be rejected when using the naive model the final results using the monetary model however indicate that t he existence of permanent deviations from ppp cannot be ruled out copyright 1987 by ohio state university press

procurement and renegotiation parties bound by an incomplete contract have an incentive to renegotiate after acquiring new information the issue of the parties investment in the relationship before renegotiation is analyzed in a simple two period procurement model the firm invests in the first period it then learns its production cost and the sponsor learns its value for the project williamson s underinvestment presumption is shown to hold under very general assumptions about bargaining and about the ex post asymmetry of information as long as the firm s investment is not observable by the sponsor the introduction of a cancellation fee may well lead to even less investment contrary to what is sometimes argued the role of ex ante price fixing as an alternative way to reintroduce some form of commitment and the problem of cost overruns are discussed last it is shown that if investment is observable by the sponsor andthus may become a joint decision variable the two parties may choose to under or overinvest

farm gate tomato price negotiations under asymmetric information this article provides an empirical analysis of farm gate tomato price negotiations under asymmetric information regression models are estimated to analyze when and by how much sellers stick to their initial ask prices and what explains the variation in the initial ask offer price spread detailed information on 66 farm gate tomato transactions and daily tomato wholesale price data from the central vegetable market in addis ababa are used for the analysis estimation results show that farmers are less committed to their initial ask price when the buyer speaks out the transaction price first when their quality perceptions of the tomatoes being transacted differ from those of the buyers and when their tomato farm is at a large distance from the main road sellers stick more to their initial ask price when they know that the central market price is high the initial ask offer price spread decreases when the buyer speaks out the initial negotiation price first but increases in the difference in quality perception between buyer and seller and in the quantity of tomatoes being transacted

advance production inventories and market power an experimental investigation i introduction bertrand edgeworth games are an important part of any industrial organization economist s toolkit the unilateral market power created by capacity constraints represents one of economists primary methods for modeling supra competitive prices as a static equilibrium outcome in a price setting game 1 the standard bertrand edgeworth model however rather restrictively assumes that production is to demand and that goods are immediately perishable in the broad swath of modern economies that includes the production and sale of physical products these assumptions are often not even approximately satisfied goods are routinely produced prior to being offered for sale at retail establishments similarly while the effective shelf life of many products is quite short relatively few products perish immediately and many have effective shelf lives that extend throughout a sales season if not longer this paper reports a laboratory experiment conducted to assess the effects of having sellers make production decisions in advance rather than to demand and allowing sellers to carry unsold units across periods on market power in a bertrand edgeworth pricing game by way of preview we find that both advance production and an inventory option prominently affect market outcomes advance production reduces profits relative to a baseline condition while an inventory option reduces both prices and profits these results are important as they suggest that deviations from the standard oligopoly structures that routinely arise in natural contexts may fundamentally affect market performance we organize the paper as follows following a brief review of the pertinent literature in section ii we outline equilibrium predictions for baseline advance production and inventory treatments in section iii section iv describes the experimental design and procedures and section v presents the experimental results the paper concludes with a short section vi ii background a theoretical literature economists have long recognized the restrictiveness of the standard price setting oligopoly models shubik 1955 for example argues that when evaluating price setting duopolies economists should consider price quantity games where sellers simultaneously post prices and quantities in addition to games where price is the only decision variable 2 levitan and shubik 1978 compute the mixed strategy equilibrium for a duopoly given advance production and unlimited capacities more recently tasnadi 2004 analyzes the case of advance production for capacity constrained duopolists pertinent to the present investigation tasnadi shows that under very general conditions advance production raises prices but leaves seller profits unaffected the only theoretical work that analyzes the links between product durability and market prices of which we are aware is a stream of literature following coase 1972 regarding the effects of product durability on monopoly power specifically given sufficiently patient consumers the coase conjecture suggests that infinite durability will eliminate monopoly power analytical results are driven by consumers who drive prices down by waiting for future discounts 3 to the best of our knowledge no one has analyzed the effects of product durability on production and pricing incentives for capacity constrained price setting duopolists b experimental literature the relevant experimental literature consists of three strands a first strand consists of a series of papers establishing that laboratory sellers recognize and exercise the unilateral market power induced by capacity constraints pertinent seminal references are davis and holt 1994 and kruse et al 1994 while some relevant related papers include davis holt and villamil 2002 davis and wilson 2000 and wilson 1998 a second strand of the experimental literature studies the effects of advance production on posted price markets

sticky prices and purchasing power parity deviations empirical implications abstract this note tests one implication of the hypothesis that purchasing power parity ppp deviations are partly caused by different pricing behavior in goods and asset markets cross country regressions of the variance of ppp deviations on the variance of money supply innovations support the hypothesis

early settlement in european merger control we analyse the determinants of early settlement between merging parties and the european commission over remedies that remove concerns of anticompetitive effects this extends the previously narrow range of econometric literature on early settlement consistent with the theory of early settlement our results confirm the importance of delay costs and of uncertainty measured by the complexity of the economic analysis required for each merger we also find a non monotonic effect of agency resourcing which raises questions about the commission s efficiency in times of high case load econometrically we select a sample of merger decisions in which the european commission intervened due to concerns of anticompetitive effects and our selection model provides estimates of the factors determining intervention by the commission conclusions are drawn for public policy

selective acceptance and inefficiency in a two issue complete information bargaining game abstract this paper explores the effects of a selective acceptance rule on the outcome of two issue negotiations the alternating offer game introduced here allows for the possibility that settlement may be reached on one issue while negotiation continues about the other this model captures features of laws that are generally believed to increase efficiency the analysis shows that if one issue is indivisible there are inefficient subgame perfect equilibria with no pareto improving alternative equilibria with opposing valuations rapid communication guarantees inefficiency these are unique examples of this strong form of inefficiency in an alternating offer bargaining game with complete and perfect information journal of economic literature classification numbers c72 j30

dynamic bargaining with action dependent valuations abstract an infinite horizon dynamic bargaining model is presented in which actions affect the expected future value of the buyer seller match because actions directly affect the future surplus to be bargained over the model is unlike other models that tie the dynamic process to nature alone focusing on a subset of weak markov equilibria several results come about that are not found in static bargaining models using similar bargaining protocols in particular optimal price demands can be lower higher than the buyer s lowest highest possible valuation and several empirical features concerning wage settlements and strike incidence from labor union contract negotiations can be explained

monetary policy as a process of search monetary policymakers are uncertain about the state of the economy and learn from the economy s reaction to policy private agents however anticipate any systematic attempt to incorporate this information into future policy the authors analyze this feedback in the context of a monetary authority s attempt to stimulate an economy in recession they show that modest stimuli may prove ineffectual if small reductions in interest rates are unlikely to promote a response then they may be followed by further cuts a vicious circle develops in which the expectation that the policy could fail leads investors to delay investment thereby promoting failure copyright 1996 by american economic association

durable goods monopoly with limited choice of commitment strategy when should the monopolist precommit consider a firm a monopolist offering a unique product to a fixed number of potential customers suppose that no consumer desires more than one unit of the good within a given period or across periods that is there is no value to repeat purchases in addition suppose that customers vary with respect to their initial reservation prices which decline over time a natural interpretation is that the monopolist is selling a good that is durable alternatively the firm is providing an entertainment or fashion good consumers may place a premium on obtaining the product quickly before it becomes less useful less stylish or less novel coase 7 conjectured that this firm s ability to extract surplus is limited because the firm has to compete with itself across time periods high valuation customers would be unwilling to pay a high initial price because they would anticipate that over time the firm will be reducing the price in order to sell to lower valuation customers subsequent literature formalizes this as a time inconsistency problem faced by a monopolist unable to make intertemporal commitments a separate strand of the literature proceeds from the polar assumption that the monopolist can precommit to any multiperiod pricing strategy comparison to coase s monopolist is simple higher profits are obtainable under precommitment because more surplus is extracted from high valuation customers an important proposition due to stokey 22 is that it will be optimal for the monopolist to precommit to a declining intertemporal price schedule if consumers with higher initial valuations have a higher rate of time preference 2 otherwise the optimal strategy is to hold price constant at the static monopoly level and to sell no more than the static monopoly quantity 3

bilateral trading and incomplete information price convergence in a small market abstract we study a model of decentralised bilateral interactions in a small market where one of the sellers has private information about her value in addition to this seller with private information there are two identical buyers and another seller whose valuation is commonly known to be in between the two possible valuations of the seller with private information we consider an infinite horizon game with simultaneous one sided offers and simultaneous responses we construct one particular pbe of the game and show that as the discount factor goes to 1 prices in all transactions converge to the same value we then show that this is the case with any stationary equilibrium of the game that is the asymptotic outcome is unique across all stationary equilibria

flexible exchange rates prices and the role of news lessons from the 1970s recent experience with flexible exchange rate systems has led to renewed interest in the operation of foreign exchange markets as reflected in many recent studies of the principal determinants of exchange rates the 1970s witnessed the dramatic alteration of the international monetary system from a regime of pegged exchange rates which prevailed for about a quarter of a century since the bretton woods conference into a regime of flexible though managed rates as a consequence of the emergence of the new legal and economic system traders national governments and international organisations were confronted with new economic problems choices and instruments during the 1970s ex change rates fluctuated widely and inflation rates accelerated the international monetary system had to accommodate extraordinarily large oil related shocks which affected trade flows in goods and assets huge oil payments had to be recycled uncertainties concerning future developments in international politics reached new heights and the prospects for the world economy got gloomier these developments placed unprecedented pressures on the markets for foreign exchange as well as on other asset markets they were associated with a large slide in the value of the us dollar and resulted in speeding up the creation of new institutions like the european monetary system which provided the formal framework for the management of exchange rates among members

bilateral trading in networks in many markets goods flow from initial producers to final customers travelling through many layers of intermediaries and information is asymmetric we study a dynamic model of bargaining in networks that captures these features we show that the equilibrium price demanded over time is non monotonic but the sequence of transaction prices declines over time with the possible exception of the last period the price dynamic is therefore reminiscent of fire sales and hot potato trading traders who intermediate the object arise endogenously and make a positive profit the profit earning intermediaries are not necessarily traders with many connections for the case of multilayer networks they belong to the path that reaches the maximum number of potential buyers using the minimal number of intermediaries this is not necessarily the path of the network that maximizes the probability of consumption by traders who value the most the object i e welfare

predation mergers and incomplete information this article examines the strategic pricing of duopolists in anticipation of a takeover of one by the other in equilibrium the acquiring firm may expand its output to signal that it is a low cost rival and thereby improve the takeover terms if the merged firm willface potential entry a premerger expansion of output may be necessary to deter entry and to make the merger profitable in that case the acquiringjirm s output expansion increases industry concentration by facilitating the takeover and by deterring entry this establishes the rationality of predatory output expansions even when a merger or a takeover is possible and indeed anticipated a voluminous literature is devoted to exploring the role of pricing in altering industry structure to achieve monopoly power that literature discusses both price cutting to drive existing rivals from the industry predatory pricing and setting low prices to deter potential entrants limit pricing the former has received the lion s share of the attention of antitrust commentators and enforcers but the rationality of predatory pricing has been seriously questioned the major criticism has two parts i takeovers are a superior means of achieving monopoly power and where legal should therefore be used instead of price cutting and ii if a takeover is anticipated premerger price cutting merely dissipates some of the value of the merging parties and would thus be irrational the first argument was originally advanced by mcgee 1958 and later by telser 1965 and bork 1978 the essential idea is that since predation is costly firms should realize that a more profitable arrangement in the form of a merger exists and ought to be negotiated the second argument is a natural extension of the first in response to this criticism yamey 1972 provides two arguments first the aggressor knows that he may face other rivals in the future entrants into this or other markets those potential rivals may draw inferences from his current behavior about the response they will face if they enter in that case the aggressor may wish to develop a reputation for aggressive behavior second even if a takeover is anticipated the terms of the takeover may be affected by the pretakeover pricing

a theory of bargaining deadlock abstract i study a dynamic one sided offer bargaining model between a seller and a buyer under incomplete information the seller knows the quality of his product while the buyer does not during bargaining the seller may receive an outside option the value of which depends on the quality of the product if the outside option is sufficiently important there is an equilibrium in which the buyer s belief about the product s quality stays constant and she continues to make the same randomized offer throughout the bargaining process as a result the equilibrium behavior produces an outcome path that resembles a bargaining deadlock and its resolution the equilibrium outcome exhibits bargaining delay that does not vanish even with frequent offers and the limiting delay may exist even without a static adverse selection problem under stronger parametric assumptions the equilibrium with deadlock is the only one in which behavior is monotonic in the buyer s belief

cheap talk can matter in bargaining this paper describes an intuitive way in which cheap talk can matter in a twostage bargaining game in which talk may be followed by serious negotiation the intuition that all buyers would claim to have low reservation prices is incorrect in our model instead if good faith participation is endogenously determined then the parties can use talk to trade off bargaining position against the probability of continued negotiation our cheap talk equilibrium features bargaining behavior that could not be equilibrium behavior in the absence of talk

durable goods monopoly with discrete demand we analyze a dynamic game between consumers and the sole seller of a durable good unlike previous analyses we assume that there exists a finite collection of buyers rather than a continuum none of the main conclusions of the literature on durable goods monopoly survives this change in assumption coase s conjecture that a durable goods monopolist cannot earn supracompetitive profits in the continuous time limit bulow s proposition that renting a durable is always more profitable than selling it and stokey s proposition that precommitting to a time path of prices is always optimal are all false when the set of buyers is finite thus the assumption of a continuum of consumers so innocuous and useful a simplification in other contexts has proved misleading in the context of durable goods monopoly

stationarity rationalizability and bargaining strategies for the seller and the buyer which are weakly stationary we demonstrate that any initial offer from the seller induced by a strategy rationalized by a weakly stationary acceptance rule for the buyer must entail the coase property our result does not presume the selection of a particular equilibrium and follows directly from the weak stationarity assumption of the buyer s acceptance rule and the rational behaviour of the players

sequentially optimal mechanisms this paper establishes that posting a price in each period is a revenue maximizing allocation mechanism in a finite period model without commitment a risk neutral seller has one object to sell and faces a risk neutral buyer whose valuation is private information and drawn from an arbitrary bounded subset of the real line the seller has all the bargaining power she designs a mechanism to sell the object at t but if trade does not occur at t she can propose another mechanism at t 1 we show that posting a price in each period is an optimal mechanism a methodological contribution of the paper is to develop a procedure to characterize optimal dynamic incentive schemes under non commitment that is valid irrespective of the structure of the agent s type 2006 the review of economic studies limited

a bargaining model with incomplete information multiplicity of sequential equilibria is a common problem in bargaining models with incomplete information in which the informed player makes an offer most of these equilibria are supported by optimistic conjectures by the uninformed player this paper re examines the bargaining model in rubinstein 1985a b monotonicity restrictions are placed on off the equilibrium path beliefs to exclude equilibria supported by optimistic conjectures sequential equilibria that survive these restrictions are characterized

imperfect durability and the coase conjecture this article considers a market served by a monopolist who sells a durable good that depreciates stochastically over time we show that there exist three types of stationary equilibria a coase conjecture equilibrium a monopoly equilibrium and a reputational equilibrium when the depreciation rate is low the coase conjecture equilibrium is the unique equilibrium for intermediate values of the depreciation rate all three equilibrium types coexist when the depreciation rate is high the monopoly equilibrium is the unique equilibrium consequently when selling a good of sufficiently low durability the monopolist does not lose any of her monopoly power furthermore the steady state output in the reputational equilibrium falls below the monopoly quantity hence in durable goods markets welfare losses due to monopoly power may be larger than in markets for perishables

a multistage model of bargaining this paper presents a simple multistage model of bargaining wherein a seller makes an offer that can be either accepted or refused if rejected the process continues how the seller s ability to make commitments affects bargaining outcomes is analysed by comparing the commitment equilibria to those arising when commitment is impossible the effects of increasing uncertainty about preferences and varying the length of the bargaining horizon are analysed the ways in which the bargaining environment can be changed to improve outcomes are discussed

sequential bargaining with incomplete information this paper describes a simple two person two period bargaining game and solves it using the concept of perfect bayesian equilibrium in which the actions of each player convey information which is used by his opponent the paper examines the effects of changes in bargaining costs the size of the contract zone and the length of the bargaining process on such aspects of the solution as the probability of impasse and the likelihood of concessions the combination of information transfer and the lack of pre commitment embodied in perfectness yields many surprising results common perceptions about the effects of parameter changes on bargaining processes are suspect and should be checked in the particular game being discussed

damaged durable goods i analyze a durable goods monopolist s incentives to introduce a damaged good a stripped down version of the original good in an infinite horizon framework the damaged good helps the monopolist to mitigate the coasian time inconsistency problem however it may lead to a welfare reduction low valuation buyers are induced to purchase the low quality damaged good early rather than buy the high quality original good later and when the players are patient the surplus loss from quality reduction outweighs the gain from earlier consumptions this welfare result contrasts with the previous literature based on a static framework