Bargaining with incomplete information

A majority of the earlier bargaining literature focuses on bilateral bargaining with complete information. There is a significant and growing literature on sequential bargaining with incomplete information (c.f, Roth (1985), Wilson (1987)). In this setting, the players involve in the bargaining situation... 

In bilateral bargaining with incomplete information (Figure 3. l-(b)), the supplier and the buyer hold private information s G [si,S2],v G [vi V2] as defined above with ex ante distributions F s) and G(v), respectively. The intermediary decides if the trade is to take place (/ (5, v)). If so, she collects p(s, v) from the buyer and pay w s, v) to the supplier. The intermediary determines P, p, w to maximize a certain function sub-ject to incentive compatibility, individual rationality, and ex post efficiency (see Section 5). 

To carry out transactions at a lower cost, the intermediary must design an efficient mechanism that offers the service. We now introduce a mechanism design framework to characterize the main components of supply chain intermediation. Consider the base model of bilateral bargaining under incomplete information. There is a significant literature on strategic sequential bargaining models with incomplete information. Roth (1985) and Wilson (1987) provide excellent surveys of this literature. A subset of the literature is concerned about... 

We summarize four basic models for supply chain intermediation according to the taxonomy established earlier. The simplest model is the complete information case based on bilateral bargaining with complete information. This is followed by three incomplete information cases. Figure 3.1 illustrates the schematics for the four different models of supply chain intermediation. 

Rubinstein, A. (1985a). A bargaining model with incomplete information about time preferences. Econometrica, 53(5) 1151-1172. 

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