Chapter 50 Bargaining with incomplete information A central question in economics is understanding the difficulties that parties have in reaching mutually beneficial agreements. Informational differences provide an appealing explanation for bargaining inefficiencies. This chapter provides an overview of the theoretical and empirical literature on bargaining with incomplete information.The chapter begins with an analysis of bargaining within a mechanism design framework. A modern development is provided of the classic result that given two parties with independent private valuations ex post efficiency is attainable if and only if it is common knowledge that gains from trade exist. The classic problems of efficient trade with one sided incomplete information but interdependent valuations and of efficiently dissolving a partnership with two sided incomplete information are also reviewed using mechanism design.The chapter then proceeds to study bargaining where the parties sequentially exchange offers. Under one sided incomplete information it considers sequential bargaining between a seller with a known valuation and a buyer with a private valuation. When there is a “gap” between the sellers valuation and the support of buyer valuations the seller offer game has essentially a unique sequential equilibrium. This equilibrium exhibits the following properties: it is stationary trade occurs in finite time and the price is favorable to the informed party (the Coase Conjecture). The alternating offer game exhibits similar properties when a refinement of sequential equilibrium is applied. However in the case of “no gap” between the sellers valuation and the support of buyer valuations the bargaining does not conclude with probability one after any finite number of periods and it does not follow that sequential equilibria need be stationary. If stationarity is nevertheless assumed then the results parallel those for the “gap” case. However if stationarity is not assumed then instead a folk theorem obtains so substantial delay is possible and the uninformed party may receive substantial surplus.The chapter also briefly sketches results for sequential bargaining with two sided incomplete information. Finally it reviews the empirical evidence on strategic bargaining with private information by focusing on one of the most prominent examples of bargaining: union contract negotiations.