Several contractual situations are such that the parties may 'step out' of negotiations and take up outside opportunities only if there is mutual consent to do so. Examples include employer-employee negotiations, divorce and inheritance procedures, and arbitration. To analyse such cases we develop the general concept of a 'joint outside option' and study its effect in the standard bargaining game. Examples from the economics of divorce and theory of the firm are considered in some depth.
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Paper provided by Queen Mary, University of London, Department of Economics in its series Working Papers with number
401.
Find related papers by JEL classification: C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
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