The Negotiators Who Knew Too Much: Transaction Costs and Incomplete Information

5 Pages Posted: 14 Mar 2019

See all articles by Patrick W. Schmitz

Patrick W. Schmitz

University of Cologne; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: 2016

Abstract

Two parties can at some future date 2 negotiate about whether or not to collaborate in order to generate a surplus. Yet, the negotiation stage will be reached only if at date 1 both parties pay their respective transaction costs. We show that the expected total surplus may be larger when at date 1 the parties do not yet know the size of the surplus that can be generated at date 2. Moreover, joint ownership can be optimal under incomplete information even when it would be suboptimal under complete information.

Keywords: Transaction Costs, Property Rights, Bargaining, Incomplete Information, Joint Ownership

JEL Classification: D23, D86, C78, L14, L24

Suggested Citation

Schmitz, Patrick W., The Negotiators Who Knew Too Much: Transaction Costs and Incomplete Information (2016). Economics Letters, Vol. 145, 2016. Available at SSRN: https://ssrn.com/abstract=3340903

Patrick W. Schmitz (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

HOME PAGE: http://schmitz.uni-koeln.de/index.php?s=mitarbeiter&t=schmitz

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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