Sequential Bargaining Under Asymmetric Information

Sanford J. Grossman, Motty Perry

NBER Technical Working Paper No. 56
Issued in May 1986

We analyze an infinite stage, alternating offer bargaining game in which the buyer knows the gains from trade but the seller does not. Under weak assumptions the game has a unique candidate Perfect Sequential Equilibrium, and it can be solved by backward induction. Equilibrium involves the seller making an offer which is accepted by buyers with high gains from trade, while buyers with medium gains reject and make a counteroffer which the seller accepts. Buyers with low gains make an unacceptable offer, and then the whole process repeats itself, Numerical simulations demonstrate the effects of uncertainty on the length of bargaining.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/t0056

Published: Grossman, Sanford J. and Motty Perry. "Sequential Bargaining Under Asymmetric Information," Journal of Economic Theory, Vol. 39, No. 1, June 1986, pp. 120-154.

Users who downloaded this paper also downloaded* these: