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BARGAINING WITH SHARED INFORMATION *
Author(s) -
Chatterjee Kalyan,
Ulvila Jacob W.
Publication year - 1982
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.1982.tb00157.x
Subject(s) - private information retrieval , microeconomics , action (physics) , computer science , economics , revelation , mathematical economics , art , physics , computer security , literature , quantum mechanics
This paper formulates and analyzes models of two‐party bargaining behavior where each side possesses private information about its preferences that is unavailable to the other. We examine the strategic behavior that bargainers might exhibit when disclosing information either to an arbitrator or to each other. Our results show that when bargaining is over one issue, it is relatively uncomplicated analytically to calculate the optimal strategy, but, despite this, even sophisticated bargainers tend to make wrong assumptions about the behavior of others and to use strategies that are far from optimal. When the bargaining encompasses several factors, computation of optimal strategies becomes very cumbersome and the use of an optimal strategy does not gain a bargainer much over what he could have achieved with truthful revelation. Thus, in theory, truthful revelation is not the best course of action to adopt for a bargainer interested in maximizing individual gain, but in practice the alternatives may involve mistaken assumptions about the behavior of others and may therefore turn out to be inferior to truthful revelation.