Scandinavian Working Papers in Economics
Working Paper Series,
Uppsala University, Department of Economics
No 2006:29: Delay in Bargaining with Externalities
Jonas Björnerstedt () and Andreas Westermark ()
Additional contact information
Jonas Björnerstedt: Swedish Competition Authority, Postal: SE-103 85 Stockholm, Sweden
Andreas Westermark: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
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
27 pages, November 24, 2006
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