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NOW OR LATER? - An Analysis of the Timing of Threats in Bargaining

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  • Siegfried K. Berninghaus
  • Werner Güth

Abstract

The variable threat-bargaining model of Nash (1953) assumes that threats in the sense of binding commitments as to what one will do if bargaining ends in conflict, are chosen before bargaining. By comparision, late threats to be chosen after bargaining end in conflict, appear more natural and would be self-enforcing, i.e., require no commitment power. Instead of exogenously imposing the timing of threats, they are derived endogenously as in indirect evolution or endogenous timing. Based on a duopoly market, we first derive the equilibrium for all possible constellations regarding the timing of threats. From these results we can show that the evolutionary analysis surprisingly justifies the early timing of threats as suggested by Nash (1953).

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Bibliographic Info

Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2002-38.

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Length: 22 pages
Date of creation: Aug 2002
Date of revision:
Handle: RePEc:esi:discus:2002-38

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Related research

Keywords: Cooperative Bargaining; Thread Points in Bargaining; Timing of Decisions;

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References

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  1. Lensberg, Terje, 1988. "Stability and the Nash solution," Journal of Economic Theory, Elsevier, vol. 45(2), pages 330-341, August.
  2. Spencer, Barbara J. & Brander, James A., 1992. "Pre-commitment and flexibility : Applications to oligopoly theory," European Economic Review, Elsevier, vol. 36(8), pages 1601-1626, December.
  3. Güth, Werner & Kliemt, Hartmut, 2001. "From full to bounded rationality: The limits of unlimited rationality," SFB 373 Discussion Papers 2001,12, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  4. Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, vol. 43(3), pages 513-18, May.
  5. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
  6. Damme, E.E.C. van & Hurkens, J.P.M., 1997. "Games with imperfectly observable commitment," Open Access publications from Tilburg University urn:nbn:nl:ui:12-74216, Tilburg University.
  7. Harsanyi, John C, 1995. "Games with Incomplete Information," American Economic Review, American Economic Association, vol. 85(3), pages 291-303, June.
  8. Sadanand, Asha & Sadanand, Venkatraman, 1996. "Firm Scale and the Endogenous Timing of Entry: a Choice between Commitment and Flexibility," Journal of Economic Theory, Elsevier, vol. 70(2), pages 516-530, August.
  9. Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
  10. Siegfried Berninghaus & Werner Güth & Hartmut Kliemt, 2003. "From teleology to evolution," Journal of Evolutionary Economics, Springer, vol. 13(4), pages 385-410, October.
  11. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
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