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Bargaining with Surplus Destruction

Author

Listed:
  • Lutz-Alexander Bush
  • Shouyong Shi
  • Quan Wen

Abstract

In a two-player alternating-offer bargaining model, if one player can destroy the surplus to be allocated, then the value to bargain for is endogenous, except at the beginning. Even with complete information, the model has perfect equilibria with delayed agreement and/or surplus destruction. The model, therefore, explains inefficiency and destruction that may appear irrational. The authors characterize the set of equilibrium payoffs and its limiting behavior as the time between offers vanishes. Real time delay remains possible even in the limit. The authors also consider the case of surplus destruction that is exogenously limited by the time between offers.

Suggested Citation

  • Lutz-Alexander Bush & Shouyong Shi & Quan Wen, 1998. "Bargaining with Surplus Destruction," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 915-932, November.
  • Handle: RePEc:cje:issued:v:31:y:1998:i:4:p:915-932
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    References listed on IDEAS

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    1. A. Fedele & A. Mantovani & F. Liucci, 2010. "Credit availability in the crisis: which role for the European Investment Bank Group?," Working Papers 699, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Gangopadhyay, Shubhashis & Mukhopadhyay, Bappaditya, 2002. "Multiple bank lending and seniority in claims," Journal of Economics and Business, Elsevier, vol. 54(1), pages 7-30.
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    Citations

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    Cited by:

    1. Busch, Lutz-Alexander & Horstmann, Ignatius J., 2002. "The game of negotiations: ordering issues and implementing agreements," Games and Economic Behavior, Elsevier, vol. 41(2), pages 169-191, November.
    2. Mehrdad Vahabi, 2011. "The Economics of Destructive Power," Chapters,in: Handbook on the Economics of Conflict, chapter 5 Edward Elgar Publishing.
    3. Rupert Gatti & Timo Goeschl & Ben Groom & Timothy Swanson, 2011. "The Biodiversity Bargaining Problem," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 48(4), pages 609-628, April.
    4. Taiji Furusawa & Quan Wen, 2001. "Unique Inneficient Perfect Equilibrium in a Stochastic Model of Bargaining with Complete Information," Vanderbilt University Department of Economics Working Papers 0121, Vanderbilt University Department of Economics.
    5. Manzini, Paola & Mariotti, Marco, 2001. "Perfect Equilibria in a Model of Bargaining with Arbitration," Games and Economic Behavior, Elsevier, vol. 37(1), pages 170-195, October.
    6. Manzini, Paola, 1999. "Strategic bargaining with destructive power," Economics Letters, Elsevier, vol. 65(3), pages 315-322, December.
    7. Hanan G. Jacoby & Ghazala Mansuri, 2010. "Watta Satta: Bride Exchange and Women's Welfare in Rural Pakistan," American Economic Review, American Economic Association, vol. 100(4), pages 1804-1825, September.
    8. Timothy Swanson & Ben Groom, 2012. "Regulating Biodiversity: What is the Problem?," CIES Research Paper series 08-2012, Centre for International Environmental Studies, The Graduate Institute.

    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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