Abstract

This paper examines the notion that delay in reaching agreement in bargaining may be caused by learning that is independent of the bargaining procedure. In particular, learning is not due to inference from the observed offers and responses of the opponent, but derives from observation of an exogenous, costly signal – we call this 'investigation'. First we observe that even if learning is costless and perfectly informative, investigation may not occur in equilibrium. Under more general conditions, however, uninformed agents typically have an incentive to try to manipulate their prior beliefs through investigation. The main result is that investigation by an uninformed agent may result in significant delay occurring before agreement is reached. We show that this delay may be sustained in the limit as the length of time period vanishes, and that this result depends crucially on the properties of the information production technology underlying investigation. Also, the delay we observe is shown to be robust to changes in the bargaining procedure