[Link to Paper]

Abstract: We consider a bargaining game in which both sides are uncertain about their opponent’s commitment, which leads to delay and welfare loss in equilibrium. We address the following question: does ex ante better public information about a player improve expected social welfare? We show that if the information cannot turn the bargaining table (turns the weak bargainer into a strong one and vice versa), more information does not help. More information about a weak bargainer has zero impact, whereas that about the strong bargainer is strictly detrimental. Moreover, by specializing in a binary signal structure, we show that if the information is more accurate in every state, it improves social welfare when it can turn the table.

Presentation: Midwest Theory2016 (U Rochester), North American Econometric Society Meetings2016 (Wharton), Bargaining Workshop (Bilkent Univ., Turkey), 27th International Conference on Game Theory (Stony Brook), 5th World Congress of Game Theory Society (Maastricht, Netherland), Asian Meetings of Econometric Society2016 (Kyoto), Finance and Economics Summer Camp2016 (ISB), European Econometric Society Meetings2016 (Geneva), European Economic Association Meeting2017 (Lisbon)