Bargaining with Asymmetric Costs for Information

Vincent Glode

University of Pennsylvania – The Wharton School

Richard Lowery

University of Texas-Austin

July 7, 2011

Abstract:

We generalize and correct a model of bargaining with endogenous information acquisition proposed by Dang (2008). Allowing for asymmetric information costs, we show that the opportunity to obtain information during the bargaining process can lead to inefficient outcomes when the responder’s cost of obtaining this information is low. We then show that, for very low costs, this inefficiency is robust to allowing agents to voluntarily increase their own information costs and potentially eliminate adverse selection problems.

Bargaining with Asymmetric Costs for Information

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