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Creative Bargaining

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  • Frankel, David M.

Abstract

We examine what happens if, as players bargain, they can exert costly effort to expand the set of possible proposals. With side payments, new ideas influence the size of the pie but not its division. The benefits of one player's creativity are shared with the other player, so effort is inefficiently low. Without side payments, new ideas do influence the distribution, so players inefficiently limit their search to ideas that favor them. Getting an idea makes an agreement more likely, but it also makes the other player's ideas less likely to be adopted. Consequently, effort can be either excessive or suboptimal.

Suggested Citation

  • Frankel, David M., 1998. "Creative Bargaining," Staff General Research Papers Archive 11927, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:11927
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    References listed on IDEAS

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    Cited by:

    1. Appelbaum, Elie, 2011. "Union-firm bargaining: Order of play and efficiency," Games and Economic Behavior, Elsevier, vol. 71(2), pages 235-245, March.
    2. Shingo Ishiguro, 2010. "Holdup, search, and inefficiency," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(2), pages 307-338, August.
    3. Wait, A., 2001. "Delays in Bargaining With Incompelete Contracts," Department of Economics - Working Papers Series 809, The University of Melbourne.
    4. Elie Appelbaum, 2009. "Alternating Offers Union-Firm Bargaining: Order of Play and Efficiency," Working Papers 2009_02, York University, Department of Economics.
    5. Mehmet Bac, 2001. "On Creating and Claiming Value in Negotiations," Group Decision and Negotiation, Springer, vol. 10(3), pages 237-251, May.
    6. de Clippel, Geoffroy & Eliaz, Kfir, 2015. "Strategic disclosure of feasible options," Games and Economic Behavior, Elsevier, vol. 91(C), pages 145-165.

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