Waiting to persuade
By: Muhamet Yildiz
Contributors: Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 02-38; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 02-38.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2002
Place of publication: Cambridge, MA
Language: eng
Number of pages: 16
Description: I analyze a sequential bargaining model in which players are optimistic about their bargaining power (measured as the probability of making offers), but learn as they play the game. I show that there exists a uniquely predetermined settlement date, such that in equilibrium the players always reach an agreement at that date, but never reach one before it. Given any discount rate, if the learning is sufficiently slow, the players agree immediately. I show that, for any speed of learning, the agreement is delayed arbitrarily long, provided that the players are sufficiently patient. Therefore, although excessive optimism alone cannot cause delay, it can cause long delays if the players are expected to learn. Keywords: Bargaining, Misperception, Optimism, Delay, Learning. JEL Classification: C72, C78, D74, D83.
Notes: "October 2002."

Includes bibliographical references (p. 15-16).

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