Bargaining under Incomplete Information

This paper presents and analyzes a bargaining model of bilateral monopoly under uncertainty. Under the bargaining rule proposed, the buyer and the seller each submit sealed offers that determine whether the good in question is sold and the transfer price. The Nash equilibrium solution of this bargaining game implies an offer strategy of each party that is monotonic in its own reservation price and depends on its assessment of the opponent's reservation price. Issues of relative bargaining advantage and efficiency are examined for a number of special cases. Finally, we discuss the appropriateness of the Nash solution concept.