What Slips the Mind Stalls the Deal: Delay in Bargaining with Absentmindedness

In finite-horizon bargaining, deals are often made "on the courthouse steps", just before the deadline. We propose a novel source of both bargaining delay and this deadline effect: absentmindedness. In a model where parties negotiate over a course of action from a binary set and utility is non-transferable, a bargainer who does not know the calendar time may rationally reject an "ultimatum offer" as the trade deadline looms. Rational confusion is a source of bargaining power for the absentminded player, as it induces the other party to make a concession near the trade deadline to prevent negotiations from breaking down. The absentminded party may reject unfavorable offers in hopes of receiving a favorable offer closer to the deadline. If utility is transferable, there are equilibria which feature delay if and only if players are patient. Such equilibria always involve history-dependent strategies.