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Bargaining and Search with Recall: A Two-Period Model with Complete Information

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  • Ching Chyi Lee

    (The Chinese University of Hong Kong, Shatin, New Territories, Hong Kong)

Abstract

Two standard results of previous bargaining models state that delay is generally not expected to occur under complete information, and bargaining outcome depends crucially on the bargainers' intrinsic characteristics that determine their reservation prices, and, in general, bargainers with “better” reservation prices tend to get better outcomes. This paper considers a bilateral bargaining problem with complete information in which one of the bargainers, the buyer, is allowed to search while bargaining. More importantly, we assume that the buyer is allowed to recall past outside offers. We find that, quite contrary to the standard results of previous complete information bargaining models, complete information renders no guarantee for immediate resolution of bargaining, and the effect of changing the buyer's search cost on each player's bargaining outcome is unpredictable. The major driving force of these two results is the assumption that the buyer can recall past outside offers.

Suggested Citation

  • Ching Chyi Lee, 1994. "Bargaining and Search with Recall: A Two-Period Model with Complete Information," Operations Research, INFORMS, vol. 42(6), pages 1100-1109, December.
    • Handle: RePEc:inm:oropre:v:42:y:1994:i:6:p:1100-1109
    DOI: 10.1287/opre.42.6.1100
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    Citations

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    Cited by:

    1. Chatterjee, Kalyan & Lee, Ching Chyi, 1998. "Bargaining and Search with Incomplete Information about Outside Options," Games and Economic Behavior, Elsevier, vol. 22(2), pages 203-237, February.
    2. Su Han Chan & Ko Wang & Jing Yang, 2009. "IPO Pricing Strategies with Deadweight and Search Costs," Journal of Real Estate Research, American Real Estate Society, vol. 31(4), pages 481-542.
    3. Rami Zwick & Ching Chyi Lee, 1999. "Bargaining and Search: An Experimental Study," Group Decision and Negotiation, Springer, vol. 8(6), pages 463-487, November.
    4. Fiona Scott Morton & Jorge Silva-Risso & Florian Zettelmeyer, 2011. "What matters in a price negotiation: Evidence from the U.S. auto retailing industry," Quantitative Marketing and Economics (QME), Springer, vol. 9(4), pages 365-402, December.
    5. Manel Baucells & Steven A. Lippman, 2004. "Bargaining with Search as an Outside Option: The Impact of the Buyer's Future Availability," Decision Analysis, INFORMS, vol. 1(4), pages 235-249, December.
    6. Matthew Jones & Bruce Kobayashi & Jason O’Connor, 2018. "Economics at the FTC: Non-price Merger Effects and Deceptive Automobile Ads," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(4), pages 593-614, December.
    7. Colin Campbell & Gautam Ray & Waleed A. Muhanna, 2005. "Search and Collusion in Electronic Markets," Management Science, INFORMS, vol. 51(3), pages 497-507, March.
    8. Mosk, T.C., 2014. "Essays on banking," Other publications TiSEM d424ec24-1bfd-4be0-b19a-3, Tilburg University, School of Economics and Management.
    9. Lee, Ching Chyi & Ferguson, Michael J., 2010. "To reveal or not to reveal? Strategic disclosure of private information in negotiation," European Journal of Operational Research, Elsevier, vol. 207(1), pages 380-390, November.

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