Disagreement in bargaining: Models with incomplete information

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Abstract
IntroductionThis essay serves as an introduction to recent work on noncooperative game-theoretic models of two-player bargaining under incomplete information. The objective is to discuss some of the problems that motivated formulation of these models, as well as cover some of the issues that still need to be addressed. I have not set out to provide a detailed survey of all the existing models, and I have therefore discussed only certain specific aspects of the models that I believe to be especially important. The reader will find here, however, a guide to the relevant literature.The title of this chapter was chosen to emphasize the phenomenon of disagreement in bargaining, which occurs almost as a natural consequence of rational behavior (i.e., equilibrium behavior) in some of these models and is difficult to explain on the basis of equilibrium behavior using the established framework of bargaining under complete information. Disagreement, of course, is only one reflection of the problem of inefficient bargaining processes. I also spend some time on the general question of efficiency and its attainment. Whereas in most models classical Pareto-efficiency is not attainable in equilibrium, it may be obtained by players who deviate from equilibrium, as will be shown.The chapter is organized as follows. Section 2.2 lays out the problem and discusses the important modeling approaches available. Section 2.3 focuses on a particular group of models, each of which specifies a strategic (i.e., extensive) form of the bargaining process.

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