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Disagreement and Authority

Author

Listed:
  • Tore Ellingsen

    (Stockholm School of Economicsâ€)

  • Topi Miettinen

    (Max Planck Institute of Economics, Jena, Germany.)

Abstract

Can 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 conflict.

Suggested Citation

  • Tore Ellingsen & Topi Miettinen, 2007. "Disagreement and Authority," Jena Economics Research Papers 2007-037, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2007-037
    as

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    File URL: https://oweb.b67.uni-jena.de/Papers/jerp2007/wp_2007_037.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Authority; Bargaining; Commitment; Disagreement; Transaction Costs;
    All these keywords.

    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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