Bargaining with Informational Externalities in a Market Equilibrium

39 Pages Posted: 25 Sep 2014

See all articles by Mikhail Drugov

Mikhail Drugov

Centre for Economic Policy Research (CEPR); New Economic School (NES)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2014

Abstract

This paper studies a dynamic bargaining model with informational externalities between bargaining pairs. Two principals bargain with their respective agents about the price they will pay for their work while its cost is agents' private information and correlated between them. The principals benchmark their agents against each other by making the same offers in the equilibrium even if this involves delaying or advancing the agreement compared to the autarky. When principals compete in complements this pattern is reinforced while under competition in substitutes the principals trade off the benefits of differentiation in the product market against the cost of the agents' rent.

Keywords: adverse selection, bargaining, competition, delay, externalities, information

JEL Classification: C78, D82, D83, L10

Suggested Citation

Drugov, Mikhail, Bargaining with Informational Externalities in a Market Equilibrium (June 2014). CEPR Discussion Paper No. DP10021, Available at SSRN: https://ssrn.com/abstract=2501493

Mikhail Drugov (Contact Author)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

New Economic School (NES) ( email )

100A Novaya Street
Moscow, Skolkovo 143026
Russia

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