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Commitment, Conflict, and Status Quo in Bargaining

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  • Harry Pei

Abstract

Each period, two players bargain over a unit of surplus. Each player chooses between remaining flexible and committing to a take-it-or-leave-it offer at a cost. If players' committed demands are incompatible, then the current-period surplus is destroyed in the conflict. When both players are flexible, the surplus is split according to the status quo, which is the division in the last period where there was no conflict. We show that when players are patient and the cost of commitment is small, there exist a class of symmetric Markov Perfect equilibria that are asymptotically efficient and renegotiation proof, in which players commit to fair demands in almost all periods.

Suggested Citation

  • Harry Pei, 2025. "Commitment, Conflict, and Status Quo in Bargaining," Papers 2503.01053, arXiv.org.
    • Handle: RePEc:arx:papers:2503.01053
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    References listed on IDEAS

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    1. Juan F. Escobar & Juuso Toikka, 2013. "Efficiency in Games With Markovian Private Information," Econometrica, Econometric Society, vol. 81(5), pages 1887-1934, September.
    2. Topi Miettinen & Christoph Vanberg, 2025. "Commitment and Conflict in Unanimity Bargaining," American Economic Journal: Microeconomics, American Economic Association, vol. 17(1), pages 206-237, February.
    3. Schmidt Klaus M., 1993. "Commitment through Incomplete Information in a Simple Repeated Bargaining Game," Journal of Economic Theory, Elsevier, vol. 60(1), pages 114-139, June.
    4. Drew Fudenberg & Eric Maskin, 2008. "The Folk Theorem In Repeated Games With Discounting Or With Incomplete Information," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 11, pages 209-230, World Scientific Publishing Co. Pte. Ltd..
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