Ultimatum Bargaining with Rational Inattention

2020 ◽  
Author(s):  
Doron Ravid
Keyword(s):  
Rational Inattention ◽  
Ultimatum Bargaining

Ultimatum Bargaining with Rational Inattention

2020 ◽  
Vol 110 (9) ◽  
pp. 2948-2963
Author(s):  
Doron Ravid
Keyword(s):  
Multiple Equilibria ◽  
Unique Equilibrium ◽  
Rational Inattention ◽  
High Quality ◽  
Ultimatum Bargaining ◽  
Entropy Reduction ◽  
Positive Payoff

A seller bargains with a rationally inattentive buyer (Sims 2003) over a good of random quality. After observing quality, the seller makes a take-it-or-leave-it offer. The buyer pays attention to the seller’s product and offer at a cost proportional to expected entropy reduction. Because attention is free off-path, multiple equilibria emerge, many of which are efficient. A trembling-hand-like refinement (Selten 1975) rules out efficiency, delivering complete disagreement when attention is expensive and a unique equilibrium with trade when attention is cheap. In this equilibrium, the buyer overpays for low-quality goods, underpays for high-quality goods, and earns a strictly positive payoff. (JEL C78, D82, D83, D86, L15)

Rational Inattention and Dynamics of Consumption and Wealth in General Equilibriumm

2016 ◽  
Author(s):  
Yulei Luo ◽  
Jun Nie ◽  
Gaowang Wang ◽  
Eric R. Young
Keyword(s):  
Rational Inattention

Categorical Screening with Rational Inattention

2020 ◽  
Author(s):  
Mogens Fosgerau ◽  
Rajiv Sethi ◽  
Jorgen W. Weibull
Keyword(s):  
Rational Inattention

Two-Level Ultimatum Bargaining with Incomplete Information: an Experimental Study

1996 ◽  
Vol 106 (436) ◽  
pp. 593 ◽  
Author(s):  
Werner Guth ◽  
Steffen Huck ◽  
Peter Ockenfels
Keyword(s):  
Experimental Study ◽  
Incomplete Information ◽  
Ultimatum Bargaining
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