Public vs. private offers in the Market for Lemons

J. Hörner, N. VIEILLE


January 2009, vol. 77, n°1, pp.29-69

Departments: Economics & Decision Sciences, GREGHEC (CNRS)

Keywords: Bargaining, Delay, Impasse, Observability, Lemons problem

We study the role of observability in bargaining with correlated values. Short-run buyers sequentially submit offers to one seller. When previous offers are observable, bargaining is likely to end up in an impasse. In contrast, when offers are hidden, agreement is always reached, although with delay.