American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Bargaining with Mechanisms
American Economic Review
vol. 112,
no. 6, June 2022
(pp. 2044–82)
Abstract
Two players bargain over a single indivisible good and a transfer, with one-sided incomplete information about preferences. Both players can offer arbitrary mechanisms to determine the allocation. We show that there is a unique perfect Bayesian equilibrium outcome. In the equilibrium, one of the players proposes a menu that is optimal for the uninformed player among all menus, such that each type of the informed player receives at least her payoff under complete information. The optimal menu can be implemented with at most three allocations. Under a natural assumption on the uninformed player's beliefs, the optimal menu coincides with the Myerson's neutral solution to the bargaining problem in this environment.Citation
Pęski, Marcin. 2022. "Bargaining with Mechanisms." American Economic Review 112 (6): 2044–82. DOI: 10.1257/aer.20210626Additional Materials
JEL Classification
- C78 Bargaining Theory; Matching Theory
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness