Buying the Option to Say 'No'

We analyze a simple model of bilateral bargaining under asymmetric information where the seller of an object can not simply say no by default to a buyer who is supposed to make a take-it-or-leave-it over. Rather, he must acquire this option before the actual bargaining process begins. This choice is observable to the buyer, and hence, the seller's pre-bargaining action might signal private information. We develop a complete characterization of Perfect Bayesian Equilibrium in pure and (strictly) mixed strategies for this game. Then the model is compared to a standard bargaining setting in terms of the realization of welfare enhancing property right changes