The Game of Negotiations: Ordering Issues and Implementing Agreements
AbstractWe study a two-issue bargaining situation in which the surplus of one issue is public information, while that of the other issue is private information to one of the parties. Bargaining is by alternating offers under common time-discounting. The bargaining agenda is determined endogenously since players are free to offer on any number of outstanding issues. Offers must, however, be accepted or rejected in their entirety. Once an offer has been accepted it is not renegotiable. We study this game under two alternative rules for implementing agreements. In the first, partial agreements are implemented as they are reached, in the alternative setting implementation is joint, so that even if an offer on one issue is accepted consumption of this surplus is nevertheless delayed until the second issue is also settled. We show that the order in which issues are bargained in equilibrium is determined by three things: the implementation rule, the type of the informed player and the initial beliefs of the uninformed player. Specifically, an issue-by-issue bargaining agenda arises only when a low-valuation informed player faces an opponent who believes him to be likely a high-valuation type. In contrast to suggestions in the negotiation practitioner literature, such initial agenda offers always involve concessions (much smaller allocations to the informed player than in a bargain without agenda offers.) We also show that it is the implementation rule which determines which issue leads in the agenda. When implementation takes place as agreements are reached, then the issue of known size is negotiated first. If agreements are implemented only after all issues are settled, then, if order is relevant at all, large issues are settled first. All parties prefer the former rules of implementation to the latter.
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1109.
Date of creation: 01 Aug 2000
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- Busch, Lutz-Alexander & Horstmann, Ignatius J., 2002. "The game of negotiations: ordering issues and implementing agreements," Games and Economic Behavior, Elsevier, vol. 41(2), pages 169-191, November.
- Lutz-Alexander Busch & Ignatius J. Horstmann, 2000. "The Game of Negotiations: Ordering Issues and Implementing Agreements," UWO Department of Economics Working Papers 200010, University of Western Ontario, Department of Economics.
- Lutz-Alexander Busch & Ignatius J. Horstmann, 1997. "The Game of Negotiations: Ordering Issues and Implementing Agreements," Working Papers 97003, University of Waterloo, Department of Economics, revised May 1997.
- Ignatius J. Horstmann & Kimberley A. Scharf, 2000. "The Game of Negotiations: Ordering Issues and Implementing Agreements," UWO Department of Economics Working Papers 200011, University of Western Ontario, Department of Economics.
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