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Bargaining and Conflict with Incomplete Information

  • Sanchez-Pages, Santiago

This paper studies bargaining and conflict under incomplete information, provides an overview and a critical account of the literature on the topic and contributes with original research. We first revise models of mechanism design and sequential bargaining that take confrontation as final. Conflict and inefficiencies are to be expected in these models whenever parties have optimistic prospects on the outcome of the all-out conflict. After examining the causes and reasons for this optimism, we move to the analysis of the recent literature that considers the existence of limited confrontations that allow bargaining to resume. In the presence of private information, these limited conflicts convey information and thus become a bargaining instrument. The paper closes with a discussion on the related empirical literature, the challenges that it faces and some potential avenues for further research.

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File URL: http://hdl.handle.net/10943/80
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Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2009-55.

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Date of creation: 2009
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Handle: RePEc:edn:sirdps:80
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  1. Drew Fudenberg & David K. Levine & Jean Tirole, 1987. "Incomplete Information Bargaining with Outside Opportunities," The Quarterly Journal of Economics, Oxford University Press, vol. 102(1), pages 37-50.
  2. Santiago Sanchez-Pages, 2003. "The use of conflict as a bargaining tool against unsophisticated opponents," ESE Discussion Papers 99, Edinburgh School of Economics, University of Edinburgh.
  3. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
  4. Kathryn E. Spier, 1992. "The Dynamics of Pretrial Negotiation," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 93-108.
  5. Powell, Robert, 1996. "Bargaining in the Shadow of Power," Games and Economic Behavior, Elsevier, vol. 15(2), pages 255-289, August.
  6. Gu, Wulong & Kuhn, Peter, 1998. "A Theory of Holdouts in Wage Bargaining," American Economic Review, American Economic Association, vol. 88(3), pages 428-49, June.
  7. Matthew O. Jackson & Massimo Morelli, 2007. "Political Bias and War," American Economic Review, American Economic Association, vol. 97(4), pages 1353-1373, September.
  8. Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, vol. 82(1), pages 100-121, March.
  9. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  10. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(03), pages 379-414, June.
  11. Lawrence M. Ausubel & Peter Cramton & Raymond J. Deneckere, 2002. "Bargaining with Incomplete Information," Papers of Peter Cramton 02barg, University of Maryland, Department of Economics - Peter Cramton, revised 12 Mar 2001.
  12. Kennan, J. & Wilson, R., 1991. "Bargaining with Private Information," Working Papers 90-01rev, University of Iowa, Department of Economics.
  13. Helmut Bester & Karl Wärneryd, 2006. "Conflict and the Social Contract," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(2), pages 231-249, 07.
  14. Hirshleifer, Jack, 1991. "The Technology of Conflict as an Economic Activity," American Economic Review, American Economic Association, vol. 81(2), pages 130-34, May.
  15. Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn.
  16. Heifetz, Aviad & Segev, Ella, 2005. "Escalation and delay in protracted international conflicts," Mathematical Social Sciences, Elsevier, vol. 49(1), pages 17-37, January.
  17. Kennan, John & Wilson, Robert, 1989. "Strategic Bargaining Models and Interpretation of Strike Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages S87-130, Supplemen.
  18. Alastair Smith & Allan C. Stam, 2004. "Bargaining and the Nature of War," Journal of Conflict Resolution, Peace Science Society (International), vol. 48(6), pages 783-813, December.
  19. Anat R. Admati & Motty Perry, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 345-364.
  20. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, November.
  21. Roger B. Myerson & Mark A. Satterthwaite, 1981. "Efficient Mechanisms for Bilateral Trading," Discussion Papers 469S, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  22. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  23. Santiago Sánchez-Pagés, 2009. "Conflict as a Part of the Bargaining Process," Economic Journal, Royal Economic Society, vol. 119(539), pages 1189-1207, 07.
  24. Urs Schweizer, 1989. "Litigation and Settlement under Two-Sided Incomplete Information," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 163-177.
  25. Wittman, Donald, 1988. "Dispute Resolution, Bargaining, and the Selection of Cases for Trial: A Study of the Generation of Biased and Unbiased Data," The Journal of Legal Studies, University of Chicago Press, vol. 17(2), pages 313-52, June.
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