Randomly available outside options in bargaining
AbstractWe consider an extension of the standard Rubinstein model where both players are randomly allowed to leave the negotiation after a rejection, in which case they obtain a payoff of known value. We show that, when the value of the outside opportunities is of intermediate size, there exist a continuum of subgame-perfect equilibrium outcomes, including some with delayed agreements. Considering outside opportunities of significant value, we prove that efficient delays arise caused by the bargainers' aspirations, in waiting for their outside, option rather than by threats. Moreover, if taking the outside option decreases the probability that the opponent receives an outside option in the future, then it is possible that exactly two equilibrium payoffs coexist. In this latter case, inefficiencies may be created by agreeing too early.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Springer in its journal Spanish Economic Review.
Volume (Year): 3 (2001)
Issue (Month): 4 ()
Contact details of provider:
Postal: Universidad del País Vasco; DFAE II; Avenida Lehendakari Aguirre, 83; 48015 Bilbao; Spain
Phone: +34 94 6013783
Fax: + 34 94 6013774
Web page: http://link.springer.de/link/service/journals/10108/index.htm
More information through EDIRC
Other versions of this item:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
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.:
- Sakovics, J. & Ponsati, C., 1995. "Rubinstein Batgaining with Tow-Sided Options," UFAE and IAE Working Papers 318.95, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Avery Christopher & Zemsky Peter B., 1994. "Option Values and Bargaining Delays," Games and Economic Behavior, Elsevier, vol. 7(2), pages 139-153, September.
- Avery Christopher & Zemsky Peter B., 1994. "Money Burning and Multiple Equilibria in Bargaining," Games and Economic Behavior, Elsevier, vol. 7(2), pages 154-168, September.
- Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-64, November.
- Vislie, Jon, 1988. "Equilibrium in a market with sequential bargaining and random outside options," Economics Letters, Elsevier, vol. 26(4), pages 325-328.
- Ponsati, C. & sakovics, J., 1996. "Bargaining in a changing Environment," UFAE and IAE Working Papers 351.96, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Ponsati Clara, 2004.
"Search and Bargaining in Large Markets With Homogeneous Traders,"
The B.E. Journal of Theoretical Economics,
De Gruyter, vol. 4(1), pages 1-27, February.
- Clara Ponsat?Author-Email: Clara.firstname.lastname@example.org, 2001. "Search and bargaining in large markets with homogeneous traders," UFAE and IAE Working Papers 533.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Ali, S. Nageeb M., 2006. "Waiting to settle: Multilateral bargaining with subjective biases," Journal of Economic Theory, Elsevier, vol. 130(1), pages 109-137, September.
- Mercedes Adamuz, 2005. "Opting Out in a War of Attrition," Economics Bulletin, AccessEcon, vol. 3(49), pages 1-6.
- Juan J. Vidal Puga, 2006.
"Reinterpreting The Meaning Of Breakdown,"
Working Papers. Serie AD
2006-22, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F Baum).
If references are entirely missing, you can add them using this form.