SFB 303 Discussion Paper No. B-286

Author: Jehiel, Philippe, and Benny Moldovanu
Title: Cyclical Delay in Infinite Horizon Bargaining with Externalities
Abstract: Externalities are shown to induce delays in negotiation games with complete and perfect information where a seller randomly meets one of the potential buyers at each stage of the game. Delays arise both in the finite and the infinite horizon game. In the finite horizon game, we identify delays both for positive and negative externalities. In the infinite horizon game, we show that with positive externalities, there exists no SPNE in pure strategies with bounded memory that exhibits delay. However, with negative externalities, we provide a simple example such that all SPNE with bounded memory have the property that long periods of waiting alternate with short periods of activity: This is the cyclical delay phenomenon.
Creation-Date: February 1994
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