Bargaining over Contingent Contracts under Incomplete Information
Geoffroy de Clippel, Jack Fanning, Kareen Rozen
American Economic Review · 2022 · Volume 112 · Issue 5
Abstract
We study bargaining over contingent contracts in problems where private information becomes public or verifiable when the time comes to implement the agreement. We suggest a simple, two-stage game that incorporates important aspects of bargaining. We characterize equilibria in which parties always reach agreement, and study their limits as bargaining frictions vanish. Under mild regularity conditions, we show all interim-efficient limits belong to Myerson's (1984) axiomatic solution. Furthermore, all limits must be interim efficient if equilibrium beliefs satisfy no-signaling-what-you-don't-know. Results extend to other bargaining protocols.
Keywords
Bargaining Theory, Matching Theory, Asymmetric and Private Information, Mechanism Design, Search, Learning, Information and Knowledge, Communication, Belief, Unawareness, Economics of Contract: Theory
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