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Status Quo Bias in Bargaining: An Extension of the Myerson–Satterthwaite Theorem with an Application to the Coase Theorem

McKelvey, Richard D. and Page, Talbot (2002) Status Quo Bias in Bargaining: An Extension of the Myerson–Satterthwaite Theorem with an Application to the Coase Theorem. Journal of Economic Theory, 107 (2). pp. 336-355. ISSN 0022-0531. doi:10.1006/jeth.2001.2954. https://resolver.caltech.edu/CaltechAUTHORS:20170822-153239731

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Abstract

We generalize the Myerson–Satterthwaite theorem to study inefficiencies in bilateral bargaining over a divisible good, with two-sided private information on the valuations. For concave quasi-linear preferences, the ex ante most efficient Bayes equilibrium of any mechanism always exhibits a bias toward the status quo. If utility functions are quadratic every Bayes equilibrium is ex post inefficient, with the expected amount of trade biased toward the disagreement point. In other words, for the class of preferences we study, there is a strategic advantage to property rights in the Coase bargaining setup in the presence of incomplete information.


Item Type:Article
Related URLs:
URLURL TypeDescription
https://doi.org/10.1006/jeth.2001.2954DOIArticle
http://www.sciencedirect.com/science/article/pii/S0022053101929540PublisherArticle
http://resolver.caltech.edu/CaltechAUTHORS:20170811-153048325 Related ItemWorking Paper
Additional Information:© 2002 Elsevier Science. Received 19 April 2000, Accepted 1 November 2001, Available online 31 December 2002. This paper was previously titled “The Coase Theorem with Private Information.” The financial support of the National Science Foundation (Grants SBR-9631627 and SES-0079301) is gratefully acknowledged. We thank Kim Border, John Duggan, Tom Palfrey, Andy Postlewaite, and Harl Ryder for valuable discussions and suggestions, and especially Kim Border for pointing us to the right duality results necessary in the proof of part B of our proposition.
Funders:
Funding AgencyGrant Number
NSFSBR-9631627
NSFSES-0079301
Subject Keywords:Coase theorem; Myerson–Satterthwaite theorem; bargaining; property rights; externalities; private information
Issue or Number:2
Classification Code:JEL: C78, D23, D62, D82
DOI:10.1006/jeth.2001.2954
Record Number:CaltechAUTHORS:20170822-153239731
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20170822-153239731
Official Citation:Richard D. McKelvey, Talbot Page, Status Quo Bias in Bargaining: An Extension of the Myerson–Satterthwaite Theorem with an Application to the Coase Theorem, Journal of Economic Theory, Volume 107, Issue 2, December 2002, Pages 336-355, ISSN 0022-0531, https://doi.org/10.1006/jeth.2001.2954. (http://www.sciencedirect.com/science/article/pii/S0022053101929540)
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80701
Collection:CaltechAUTHORS
Deposited By: Tony Diaz
Deposited On:23 Aug 2017 17:13
Last Modified:15 Nov 2021 19:38

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