A Model of Negotiation, not Bargainig
AbstractBargaining models ask how a surplus is split between two parties in bilateral monopoly. Much of real-world negotiation involves complications to the original split which may or may not increase the welfare of both parties. The parties must decide which complications to propose, how closely to examine the other side's proposals, and when to accept them. This type of negotiation raises welfare, rather than reducing it. This paper models negotiation as a two-period auditing game, and find a variety of plausible equilibria, some of which can be pareto-ranked. Expectations are highly important, and precommitment can increase welfare substantially.
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Bibliographic InfoPaper provided by Indiana - Center for Econometric Model Research in its series Papers with number 94-007.
Length: 23 pages
Date of creation: 1994
Date of revision:
Contact details of provider:
Postal: Indiana University, Center for Econometric Model Research, Department of Economics; Bloomington, IN 47405.
Web page: http://www.indiana.edu/~econweb/
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Other versions of this item:
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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