Equilibrium Partner Switching in a Bargaining Model with Asymmetric Information

Posted: 14 Jan 2001

See all articles by Gianni De Fraja

Gianni De Fraja

University of Nottingham; Universita' di Roma; Centre for Economic Policy Research (CEPR)

Abhinay Muthoo

University of Essex - Department of Economics

Abstract

We study a model in which the seller of an indivisible object faces two potential buyers and makes an offer to either of them in each period. We find that the seller's ability to extract surplus from them depends crucially on the value of the cost of switching from one buyer to the next. If the seller is pessimistic about the buyers' valuations and there is a switching cost, however small, then the market is a natural bilateral monopoly; the second buyer is never called on. If the switching cost is zero, or if the seller is optimistic, then switching, and possibly recall of the original buyer, may occur.

Suggested Citation

De Fraja, Gianni and Muthoo, Abhinay, Equilibrium Partner Switching in a Bargaining Model with Asymmetric Information. International Economic Review, Vol. 41, No. 4, November 2000. Available at SSRN: https://ssrn.com/abstract=247480

Gianni De Fraja (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Universita' di Roma ( email )

Dipartimento SEFEMEQ
Via Columbia n.2
Rome, Rome 00133
Italy

HOME PAGE: http://www.economia.uniroma2.it/docenti

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Abhinay Muthoo

University of Essex - Department of Economics ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom
+44 1206 873 333 (Phone)
+44 1206 872 724 (Fax)

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