Over-Confidence may Reduce Negotiation Delay
30 Pages Posted: 23 May 2010
Date Written: February 2, 2010
When a seller negotiates with multiple buyers, how does over-confidence affect the timing of trade? In this paper we distinguish between over-confidence about trade opportunities and over-confidence about the terms of trade. In bargaining environments without externalities both types of over-confidence can cause delays in agreement. If externalities are present the two forms of subjective bias have very different impacts on delay. In particular, over-confidence about trade opportunities may reduce bargaining delay.
Keywords: Bargaining, Over-Confidence, Externalities
JEL Classification: C78, D62
Suggested Citation: Suggested Citation