Inefficient pre-bargaining search
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Wernerfelt_Ineffiecient Pre.pdf
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Author(s)
Wernerfelt, Birger
Date Issued
December 2010
Journal
Journal of Institutional and Theoretical Economics
Publisher
Mohr Siebeck
Citation
Wernerfelt, Birger. "Inefficient Pre-bargaining Search." Journal of Institutional and Theoretical Economics (June 2012) vol. 168, issue 2, pages 211-223.
Version
Author's final manuscript
Abstract
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.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike 3.0
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DOI of Published Version
http://dx.doi.org/10.1628/093245612800933979
https://doi.org/10.1628/093245612800933979
