BARGAINING AND SEARCH WITH INCOMPLETE INFORMATION ABOUT OUTSIDE OPTIONS

This paper considers a model of bargaining in which the seller makes o ffers and the buyer can search (at a cost) for an outside option; the outside option cannot be credibly communicated, and the seller's offer is recallable by the buyer for one period. There are essentially two equilibrium regimes. For sufficiently high search cost, the game ends immediately; otherwise the search occurs in equilibrium. Compared to t he case where the buyer can communicate his outside option, the seller is worse off, and the game results in search for a smaller set of val ues of the search cost, i.e., less equilibrium delay. (C) 1998 Academi c Press.