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Negotiation statements with promise and threat

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  • Jin Yeub Kim

    (Yonsei University)

Abstract

A negotiator, in order to achieve her goal, must induce an agent to cooperate. The agent faces costs or risks for cooperating. I develop a game-theoretic model where the negotiator may issue a negotiation statement that contains a threat of punishment for non-cooperation and a promise of reward for cooperation; after which the agent must choose either to cooperate or not. I derive necessary and sufficient conditions under which combining a threat with a promise is effective and credible in inducing the agent’s full cooperation. I discuss insights from the model in the context of two applications. My analysis provides a rationale for the use of both promise and threat in negotiations to establish cooperation, increasing the chance of achieving the negotiator’s goal.

Suggested Citation

  • Jin Yeub Kim, 2022. "Negotiation statements with promise and threat," Review of Economic Design, Springer;Society for Economic Design, vol. 26(2), pages 149-164, June.
  • Handle: RePEc:spr:reecde:v:26:y:2022:i:2:d:10.1007_s10058-021-00261-8
    DOI: 10.1007/s10058-021-00261-8
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    References listed on IDEAS

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