Abstract
We study a bargaining model in which a buyer makes frequent offers to a privately informed seller. In addition, the buyer gradually learns about the seller’s type from a publicly observable news process. We show that the buyer’s ability to leverage this information to extract more surplus from the seller is remarkably limited. In fact, the buyer’s equilibrium payoff is identical to what he would achieve if he were unable to price discriminate. Delay occurs only if the adverse-selection problem is sufficiently strong. When trade is delayed, the buyer engages in a kind of costly experimentation” by making offers that are sure to earn him negative payoffs if accepted, but that improve his information and expected continuation payoff if rejected. We investigate the effects of market power by comparing our results to a setting with competitive buyers. Surprisingly, both efficiency and the seller’s payoff can decrease by introducing competition among buyers.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
