Credible Comparisons in Multi-Issue Bargaining
AbstractWe find that bargaining over multiple issues as a bundle allows for credible cheap talk on the relative importance of the issues even when interests are directly opposed on each issue. This communication increases the chance of agreement by allowing the offerer to concede more on the issue of greater importance to the offeree. In contrast, if the issues are bargained over separately we find that the offeree will lie about which issue is of greater importance. The communication gains from bundling are in addition to the gains from bundling previously identified in the monopoly pricing literature. Applied to negotiations between an executive and a legislature, our results imply that bundling multiple issues in a single bill with no line-item veto increases communication and can benefit both the legislature and, in many cases, the executive as well.
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Bibliographic InfoPaper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2002-04.
Date of creation: Apr 2002
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bundling; bargaining; cheap talk; veto;
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-04-25 (All new papers)
- NEP-GTH-2002-05-01 (Game Theory)
- NEP-PBE-2002-04-25 (Public Economics)
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