IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_9297.html
   My bibliography  Save this paper

The Focusing Effect in Negotiations

Author

Listed:
  • Andrea Canidio
  • Heiko Karle

Abstract

Two players with preferences distorted by the focusing effect (Koszegi and Szeidl, 2013) negotiate an agreement over several issues and one transfer. We show that, as long as their preferences are differentially distorted, an issue will be inefficiently left out of the agreement or inefficiently included in the agreement whenever the importance of the other issues on the table is sufficiently large. Anticipating this possibility, the negotiating parties may negotiate in stages, by first signing an incomplete agreement and later finalizing the outcome of the negotiation. Negotiating in stages increases the efficiency of the negotiation, despite the fact that the players’ preferences are distorted by the focusing effect also when negotiating the incomplete agreement.

Suggested Citation

  • Andrea Canidio & Heiko Karle, 2021. "The Focusing Effect in Negotiations," CESifo Working Paper Series 9297, CESifo.
  • Handle: RePEc:ces:ceswps:_9297
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp9297.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Markus Dertwinkel-Kalt & Holger Gerhardt & Gerhard Riener & Frederik Schwerter & Louis Strang, 2021. "Concentration Bias in Intertemporal Choice," CESifo Working Paper Series 9011, CESifo.
    2. Lutz-Alexander Busch & Ignatius Horstmann, 1999. "Endogenous Incomplete Contracts: A Bargaining Approach," Canadian Journal of Economics, Canadian Economics Association, vol. 32(4), pages 956-975, August.
    3. Flamini, Francesca, 2007. "First things first? The agenda formation problem for multi-issue committees," Journal of Economic Behavior & Organization, Elsevier, vol. 63(1), pages 138-157, May.
    4. Bac, Mehmet & Raff, Horst, 1996. "Issue-by-Issue Negotiations: The Role of Information and Time Preference," Games and Economic Behavior, Elsevier, vol. 13(1), pages 125-134, March.
    5. Apffelstaedt, Arno & Mechtenberg, Lydia, 2016. "Competition for Context-Sensitive Consumers," MPRA Paper 99509, University Library of Munich, Germany.
    6. Auster, Sarah, 2013. "Asymmetric awareness and moral hazard," Games and Economic Behavior, Elsevier, vol. 82(C), pages 503-521.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Markus Dertwinkel-Kalt & Holger Gerhardt & Gerhard Riener & Frederik Schwerter & Louis Strang, 2021. "Concentration Bias in Intertemporal Choice," CESifo Working Paper Series 9011, CESifo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Busch, Lutz-Alexander & Horstmann, Ignatius J., 2002. "The game of negotiations: ordering issues and implementing agreements," Games and Economic Behavior, Elsevier, vol. 41(2), pages 169-191, November.
    2. Rudolf Vetschera & Michael Filzmoser & Ronald Mitterhofer, 2014. "An Analytical Approach to Offer Generation in Concession-Based Negotiation Processes," Group Decision and Negotiation, Springer, vol. 23(1), pages 71-99, January.
    3. Francesca Flamini, "undated". "Strategic Effects and Incentives in Multi-issue Bargaining Games," Working Papers 2005_5, Business School - Economics, University of Glasgow.
    4. Francesca Flamini, "undated". "A Note on Agenda Restrictions in Multi-Issue Bargaining," Working Papers 2003_15, Business School - Economics, University of Glasgow.
    5. Caparrós, By Alejandro & Pereau, Jean-Christophe, 2021. "Inefficient coasean negotiations over emissions and transfers," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 359-378.
    6. Guoming Lai & Katia Sycara, 2009. "A Generic Framework for Automated Multi-attribute Negotiation," Group Decision and Negotiation, Springer, vol. 18(2), pages 169-187, March.
    7. D r. (elect.) Julia Korosteleva, "undated". "Maximising Seigniorage and Inflation Tax: The Case of Belarus," Working Papers 2006_5, Business School - Economics, University of Glasgow.
    8. Guoming Lai & Cuihong Li & Katia Sycara, 2006. "Efficient Multi-Attribute Negotiation with Incomplete Information," Group Decision and Negotiation, Springer, vol. 15(5), pages 511-528, September.
    9. Schipper, Burkhard C., 2021. "Discovery and equilibrium in games with unawareness," Journal of Economic Theory, Elsevier, vol. 198(C).
    10. Haisken-DeNew, John & Hasan, Syed & Jha, Nikhil & Sinning, Mathias, 2018. "Unawareness and selective disclosure: The effect of school quality information on property prices," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 449-464.
    11. Sarah Auster & Nicola Pavoni, 2020. "Limited Awareness and Financial Intermediation," ECONtribute Discussion Papers Series 043, University of Bonn and University of Cologne, Germany.
    12. Inés Macho-Stadler & David Pérez-Castrillo, 2018. "Moral hazard: Base models and two extensions," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume I, chapter 16, pages 453-485, Edward Elgar Publishing.
    13. Antoine Dubus, 2020. "Asymmetric awareness and heterogeneous agents," Rationality and Society, , vol. 32(4), pages 461-484, November.
    14. Schumacher, Heiner & Thysen, Heidi, 2017. "Equilibrium Contracts and Boundedly Rational Expectations," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168085, Verein für Socialpolitik / German Economic Association.
    15. Markus Dertwinkel-Kalt & Holger Gerhardt & Gerhard Riener & Frederik Schwerter & Louis Strang, 2021. "Concentration Bias in Intertemporal Choice," CESifo Working Paper Series 9011, CESifo.
    16. Marie-Claire Villeval & Manfred Konigstein, 2005. "The Choice of the Agenda in Labor Negotiations: efficiency and behavioral considerations," Working Papers 0508, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    17. Dertwinkel-Kalt, Markus & Köster, Mats & Peiseler, Florian, 2019. "Attention-driven demand for bonus contracts," European Economic Review, Elsevier, vol. 115(C), pages 1-24.
    18. Wenjun Ma & Burkhard C. Schipper, 2017. "Does exposure to unawareness affect risk preferences? A preliminary result," Theory and Decision, Springer, vol. 83(2), pages 245-257, August.
    19. In, Younghwan & Serrano, Roberto, 2004. "Agenda restrictions in multi-issue bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 53(3), pages 385-399, March.
    20. Antoine Dubus, 2017. "Asymmetric Awareness and Heterogeneous Agents," Working Papers hal-01521487, HAL.

    More about this item

    Keywords

    salience; focusing effect; bargaining; negotiations; incomplete agreements;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_9297. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.