Some Have a Talent for Bargaining and Some Dont

In Bargaining Theory players di¤er from one another in either their valuation for the negotiated object and/or their time preferences. We suggest a model that incorporates "bargaining ability" as another source for heterogeneity across players. This bargaining ability for the buyer determines how many o¤ers he will be able to turn down before he walks away. For the seller this ability determines how many o¤ers she will be willing to make before she decides to make no more o¤ers. In order to emphasize the role of the bargaining skill as what motivates the bargainers we assume that players do not discount time while in the game. This assumption is natural in many daily bargaining situations in which bargaining last for no more than few minutes and the time between consecutive o¤ers is normally seconds. This paper suggests a theoretical explanation for the observed behavior in these situations. Incomplete information for both players on their opponent’s bargaining talent leads the seller to lower her o¤ers in equilibrium. We then get in equilibrium a series of decreasing turned down o¤ers. The bargaining then either ends with trade or when the buyer decides to walk away or when the seller decides to make