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Commitment and compromise in bargaining

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  • Li, Duozhe

Abstract

This paper studies observable and irrevocable commitment in bargaining. We investigate when commitment tactics can cause an impasse and when compromise is feasible. In the static model in which a player's commitment decision is made simultaneously with his choice of bargaining stance, compromise becomes unattainable (Ellingsen and Miettinen, 2008). We first analyze a static bargaining model, in which the players decide whether to attempt commitment after announcing their demands. In contrast to the aforementioned strong result, our model accommodates both incompatible commitments and compromises as equilibrium outcomes. We then extend our analysis to a dynamic setting. It is shown that compromise is possible if the players can alter their demands quickly and the chances of successful commitment are low.

Suggested Citation

  • Li, Duozhe, 2011. "Commitment and compromise in bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 77(2), pages 203-211, February.
  • Handle: RePEc:eee:jeborg:v:77:y:2011:i:2:p:203-211
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    References listed on IDEAS

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    1. Tore Ellingsen & Topi Miettinen, 2008. "Commitment and Conflict in Bilateral Bargaining," American Economic Review, American Economic Association, vol. 98(4), pages 1629-1635, September.
    2. Muhamet Yildiz, 2003. "Bargaining without a Common Prior-An Immediate Agreement Theorem," Econometrica, Econometric Society, vol. 71(3), pages 793-811, May.
    3. Kambe, Shinsuke, 1999. "Bargaining with Imperfect Commitment," Games and Economic Behavior, Elsevier, vol. 28(2), pages 217-237, August.
    4. Chatterjee, Kalyan & Samuelson, Larry, 1990. "Perfect Equilibria in Simultaneous-Offers Bargaining," International Journal of Game Theory, Springer;Game Theory Society, vol. 19(3), pages 237-267.
    5. Muthoo, Abhinay, 1996. "A Bargaining Model Based on the Commitment Tactic," Journal of Economic Theory, Elsevier, vol. 69(1), pages 134-152, April.
    6. Crawford, Vincent P, 1982. "A Theory of Disagreement in Bargaining," Econometrica, Econometric Society, vol. 50(3), pages 607-637, May.
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    Cited by:

    1. Miettinen, Topi & Perea, Andrés, 2015. "Commitment in alternating offers bargaining," Mathematical Social Sciences, Elsevier, vol. 76(C), pages 12-18.
    2. Ellingsen, Tore & Miettinen, Topi, 2014. "Tough negotiations: Bilateral bargaining with durable commitments," Games and Economic Behavior, Elsevier, vol. 87(C), pages 353-366.
    3. Dutta, Rohan, 2012. "Bargaining with revoking costs," Games and Economic Behavior, Elsevier, vol. 74(1), pages 144-153.
    4. Chung, Bobby W. & Wood, Daniel H., 2019. "Threats and promises in bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 165(C), pages 37-50.

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