Location: 368A Heady Hall

Description: Joyee Deb
"Gambling with Public Opinion"

Abstract: We consider bargaining environments where two agents make demands, following which public opinion forms. Agents then bargain again, and suffer costs of compromise if they scale back  their initial demands. If public opinion favors one agent, it is more costly for her to compromise. In a simple model with symmetric uncertainty about public opinion, we show that there is a unique equilibrium where agents never make compatible demands in the first stage, but rather gamble over public opinion. This implies inevitable welfare loss with at least one party making a costly compromise. Welfare losses increases with the extent of uncertainty.

Contact Person: Joydeep Bhattacharya