Polarization and delay: uncertainty in reputational bargaining

I show how uncertainty about fundamentals can cause delay in bargaining when agents have reputational concerns. Agents’ publicly observable costs of delay change stochastically at some revelation time. In addition to rational agents, there are behavioral types committed to many different fixed demands. I show that even when the probability of behavioral types is arbitrarily small, agreement may be delayed until after the revelation time and rational agents may demand almost the entire surplus. If behavioral types can make time-varying demands, however, then the outcome converges to the solution of a complete information alternating offers game.