Cyclical Delay in Bargaining with Externalities.

Externalities between buyers are shown to induce delays in negotiations between a seller and several buyers. Delays arise in a perfect and complete information setting with random matching even when there is no decline. While with a deadline the authors identify delays both for positive and negative externalities, without deadline they find that, when externalities are positive, there exists no subgame-perfect Nash equilibrium in pure strategies with bounded recall that exhibits delay; and when externalities are negative, it may happen that all subgame-perfect Nash equilibrium with bounded recall have the property that long periods of waiting alternate with short periods of activity: this is the cyclical delay phenomenon. Copyright 1995 by The Review of Economic Studies Limited.