Disagreement and Authority
AbstractCan two negotiators fail to agree when both the size of the surplus and the rationality of the negotiators are common knowledge? We show that the answer is affrmative. When the negotiators can make irrevocable commitments at a low but positive cost, the unique symmetric equilibrium entails disagreement with high probability. In the unique pair of pure strategy equilibria, one party gets all the surplus. Even though we impose no constraints on side-payments, effcient compromises are unattainable. A strongly asymmetric authority relationship is thus the only viable alternative to costly conï¬‚ict.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2007-037.
Date of creation: 18 Jul 2007
Date of revision:
Authority; Bargaining; Commitment; Disagreement; Transaction Costs;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
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