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Outsiders' threat and consecutive offers

Author

Listed:
  • Ling Qiu

    (Department of Economics, University of Windsor, Windsor, Ontario, N9B 3P4, CANADA)

  • Quan Wen

    (Department of Economics, University of Windsor, Windsor, Ontario, N9B 3P4, CANADA)

Abstract

We study the effects of outsiders' threat and consecutive offers in the two-person bargaining model of Shaked and Sutton (1984). In our first model, there are no outsiders and the firm can make two consecutive offers for every given number of periods. Our first model has the same unique equilibrium as in Shaked and Sutton (1984). In our second model, the firm can switch between rival partners but cannot change the alternating proposing sequence. Our second model has the same perfect equilibrium as in Rubinstein (1982). So the key factor that leads to the equilibrium of Shaked and Sutton (1984) is the possibility of firm's consecutive offers, not the outsiders' threat.

Suggested Citation

  • Ling Qiu & Quan Wen, 2000. "Outsiders' threat and consecutive offers," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(3), pages 663-676.
    • Handle: RePEc:spr:joecth:v:15:y:2000:i:3:p:663-676
    Note: Received: 23 December 1998; revised version: 21 May 1999
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    More about this item

    Keywords

    Non-cooperative bargaining model; Involuntary unemployment; Outsiders' threat.;
    All these keywords.

    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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