Privacy in Bargaining: The Case of Endogenous Entry

Dynamic Bargaining with Private Information

“…From a technical perspective, the fact that we can first (and quite easily) solve for V (k t ) and P(k t ) without solving for the whole equilibrium makes it much easier to solve for the equilibrium. This advantage has been exploited by several related papers such as DeMarzo and Urosevic ( 2006), Daley and Green (2019), Chaves (2019), and DeMarzo and He (2020) that work directly in continuous time.…”

“…She realizes at that point that she would have been better off asking for more and waiting for the arrival (D(k)π(k) > P(k) − c). Chaves (2019) considers next a game where rejected offers are not observable by the potential entrants. The potential entrants are aware of when the negotiations started, so they update their beliefs about the value of entry based on the time passed.…”

“…These observations lead to an important difference in the equilibrium payoffs of the seller. Chaves (2019) shows that in the private offers equilibrium trade is smooth (i.e., k t changes continuously on the equilibrium path) and hence the equilibrium payoff satisfies:…”

“…If entrants are discouraged as k decreases, for example, because the value of the entrant is proportional to the value of the incumbent, then (k) can be increasing Chaves (2019). analyzes both cases, we focus on decreasing (k).4 Dynamic Bargaining with Private Information…”