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Endogenous reference points in bargaining

Author

Listed:
  • Emin Karagözoğlu

    () (Bilkent University
    CESifo)

  • Kerim Keskin

    () (Kadir Has University)

Abstract

We allow the reference point in (cooperative) bargaining problems with a reference point to be endogenously determined. Two loss averse agents simultaneously and strategically choose their reference points, taking into consideration that with a certain probability they will not be able to reach an agreement and will receive their disagreement point outcomes, whereas with the remaining probability an arbitrator will distribute the resource by using (an extended) Gupta–Livne bargaining solution (Gupta and Livne in Manag Sci 34:1303–1314, 1988). The model delivers intuitive equilibrium comparative statics on the breakdown probability, the loss aversion coefficients, and the disagreement point outcomes.

Suggested Citation

  • Emin Karagözoğlu & Kerim Keskin, 2018. "Endogenous reference points in bargaining," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 88(2), pages 283-295, October.
  • Handle: RePEc:spr:mathme:v:88:y:2018:i:2:d:10.1007_s00186-018-0636-2
    DOI: 10.1007/s00186-018-0636-2
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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.
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    18. repec:dgr:umamet:2009030 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Emin Karagözoğlu & Kerim Keskin, 2015. "A Tale of Two Bargaining Solutions," Games, MDPI, Open Access Journal, vol. 6(2), pages 1-14, June.
    2. Tarık Kara & Emin Karagözoğlu & Elif Özcan-Tok, 0. "Bargaining, Reference Points, and Limited Influence," Dynamic Games and Applications, Springer, vol. 0, pages 1-37.

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