Faculty of Economics and Business Administration Publications Database

Alternating-Offer Bargaining over Menus under Incomplete Information

Volume: 22
Number: 2
Pages: 419 - 429
Month: September
ISSN-Print: 0938-2259
Link External Source: Online Version
Year: 2003
Keywords: Screening; Bargaining
Abstract: This paper considers bargaining with one-sided private information and alternating offers where an agreement specifies both a transfer and an additional (sorting) variable. Moreover, both sides can propose menus. We show that for a subset of parameters the alternating-offer game has a unique equilibrium where efficient contracts are implemented in the first period. This stands in sharp contrast to the benchmarks of contract theory, where typically only the uninformed side proposes, and bargaining theory, where typically the agreement only specifies a transfer.