STRATEGIC DELAY AND ENDOGENOUS OFFERS IN BARGAINING GAMES WITH PRIVATE INFORMATION

This paper endogenously determines the order of offers and the duratio n of delay in reaching agreement between buyers and sellers in a conti nuous-time bargaining game in which a seller wishes to vend an object of known cost to a buyer, to whom the value of the good is private inf ormation, and in which each player can choose to strategically delay a response to a previous offer or to interrupt the delay of his rival. Both buyers and sellers are shown to prefer to move first in a model o f bargaining in which: (1) either player can make the first offer; (2) after the minimum time has elapsed from the previous offer, either pl ayer can make an offer; and (3) players can choose to strategically de lay and refrain from making an offer after the previous offer. When th e buyer moves first, the equilibrium response for the seller is to acc ept the offer immediately. When the seller moves first the equilibrium is characterized by the seller making all but the last offer, with mi nimal feasible delay between successive offers. Observable endogenous delay in reaching an agreement in such equilibria approaches zero as t he minimal feasible delay between offers approaches zero. This indicat es that in noncooperative bargaining models with private information, where players can strategically delay their offers, endogenizing the o rder in which players make offers removes the ability of informational asymmetries to generate equilibria exhibiting endogenous delay in rea ching an agreement.