Bargaining with informational and payoff externalities

Abstract This paper studies a dynamic bargaining model with informational externalities between bargaining pairs. Two principals bargain with their respective agents about the price for their work while its cost is agents' private information and is correlated between them. Depending on the equilibrium, information from the other pair helps or hinders principals' ability to offer low prices. A higher correlation can then either increase or decrease principals' payoffs, delay, and welfare.