Working Paper Series, Department of Economics, Uppsala University
Delay in Bargaining with Externalities
() and Andreas Westermark
Abstract: This paper studies infinite-horizon bargaining between a
seller and multiple buyers when externalities are present. We extend the
analysis in Jehiel & Moldovanu (1995a), by allowing for both pure and mixed
equilibria. This extension is warranted, since under some circumstances,the
complexity of the equilibria with bounded recall they analyze tend to
infinity as players become very patient. We show that stationary subgame
perfect equilibria always exist. Moreover, a characterization of the
stationary subgame perfect equilibria in generic games is presented.
Equilibria with delay exist only for strong positive externalities. Since
ach buyer receives a positive payoff when the seller agrees with some other
buyer, positive externalities induces a war of attrition between buyers.
Furthermore, the results when analyzing mixed stationary equilibria are
different than when focusing on pure strategies with bounded recall as
Jehiel & Moldovanu (1995a). Specifically, they find delay only when
externalities are negative.
Keywords: Bargaining; externalities; delay; (follow links to similar papers)
JEL-Codes: C72; C78; D62; (follow links to similar papers)
27 pages, November 24, 2006
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