Alternating-Offer Bargaining with the Global Games Information Structure

80 Pages Posted: 3 Nov 2014 Last revised: 25 Jul 2017

See all articles by Anton Tsoy

Anton Tsoy

University of Toronto - Department of Economics

Date Written: July 23, 2017

Abstract

In this study, I examine the alternating-offer bilateral bargaining model with private correlated values. The correlation of values is modeled via the global games information structure. I focus on the double limits of perfect Bayesian equilibria as offers become frequent and the correlation approaches perfect. I characterize the Pareto frontier of the double limits and show that it is efficient, but the surplus split generally differs from the Nash Bargaining split. I then construct a double limit that approximates the Nash Bargaining split in the ex-post surplus, but with a delay. Further, I prove the Folk theorem when the range of the buyer's values coincides with the range of the seller's costs: any feasible and individually rational ex-ante payoff profile can be approximated by a double limit.

Keywords: bargaining delay, alternating offers, incomplete information, private correlated values, Coase conjecture, global games

JEL Classification: C74, C78, D82

Suggested Citation

Tsoy, Anton, Alternating-Offer Bargaining with the Global Games Information Structure (July 23, 2017). Available at SSRN: https://ssrn.com/abstract=2419314 or http://dx.doi.org/10.2139/ssrn.2419314

Anton Tsoy (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S3G7
Canada

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