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A Theory of Agreements in the Shadow of Conflict

  • Joan-Maria Esteban
  • József Sákovics

We present a novel approach to N-person bargaining, based on the idea that the agreement reached in a negotiation is determined by how the direct conflict resulting from disagreement would be resolved. Our basic building block is the disagreement function, which maps each set of feasible outcomes into a disagreement point. Adding this function to the description of a bargaining problem, a weak axiom based on individual rationality leads to a unique solution: the agreement in the shadow of conflict, ASC. This agreement may be construed as the limit of a sequence of partial agreements, each of which is reached as a function of the parties' relative power in the disagreement scenario. We provide a non-cooperative implementation as well.

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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 255.

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Date of creation: Dec 2005
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Handle: RePEc:bge:wpaper:255
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