Optimal value commitment in bilateral bargaining
AbstractWe study the role of commitment as a source of strategic power in a non-cooperative bargaining game. Two impatient players bargain about the division of a shrinking surplus under a standard bargaining protocol in discrete time with constant recognition probabilities. Before bargaining, a player can commit to some part of the surplus. This commitment remains binding until the surplus has shrunk below the amount that the player is committed to. Intuitively, one cannot remain committed to something which has become impossible. The model offers insight on the relative importance of proposal power and commitment for the bargaining outcome. In a version of the game where both players may simultaneously choose their commitments, the equal split emerges from within a range of equilibrium divisions as a focal point which is robust to changes in the model parameters.
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Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 77 (2013)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/inca/622836
Strategic bargaining; Commitment; Subgame perfect equilibrium;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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