On the Strategic Disclosure of Feasible Options in Bargaining

46 Pages Posted: 14 Mar 2011

See all articles by Geoffroy de Clippel

Geoffroy de Clippel

Brown University - Department of Economics

Kfir Eliaz

Brown University

Date Written: February 2011

Abstract

Most of the economic literature on bargaining has focused on situations where the set of possible outcomes is taken as given. This paper is concerned with situations where decision-makers first need to identify the set of feasible outcomes before they bargain over which of them is selected. Our objective is to understand how different bargaining institutions affect the incentives to disclose possible solutions to the bargaining problem, where inefficiency may arise when both parties withhold Pareto superior options. We take a first step in this direction by proposing a simple, stylized model that captures the idea that bargainers may strategically withhold information regarding the existence of feasible alternatives that are Pareto superior. We characterize a partial ordering of regular bargaining solutions (i.e., those belonging to some class of natural solutions) according to the likelihood of disclosure that they induce. This ordering identifies the best solution in this class, which favors the weaker bargainer subject to the regularity constraints. We also illustrate our result in a simple environment where the best solution coincides with Nash, and where the Kalai-Smorodinsky solution is ranked above Raiffa's simple coin-toss solution. The analysis is extended to a dynamic setting in which the bargainers can choose the timing of disclosure.

Keywords: Bargaining, Disclosure

JEL Classification: C78, D74, D82

Suggested Citation

de Clippel, Geoffrey and Eliaz, Kfir, On the Strategic Disclosure of Feasible Options in Bargaining (February 2011). CEPR Discussion Paper No. DP8262. Available at SSRN: https://ssrn.com/abstract=1782556

Geoffrey De Clippel (Contact Author)

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

Kfir Eliaz

Brown University ( email )

Economics Dept.
Box B
Providence, RI 02912
United States
401-863-2112 (Phone)
401-863-1970 (Fax)

HOME PAGE: http://www.econ.brown.edu/fac/Kfir_Eliaz/

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