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Strategic bargaining with destructive power

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  • Manzini, Paola

Abstract

This paper studies a two-player alternating offers bargaining model in which one of the agents has the ability to damage permanently the ``pie'' bargained over. I show how this feature can result in an increase of the cost of rejecting an offer for the ``non-harming player''. Beside the ``Rubinstenian'' bilateral monopoly outcome, I show that it is possible to select a ``harming'' equilibrium in which the sequence of damages to the pie is endogenously determined and payoffs do not vary monotonically with the discount factor.
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Suggested Citation

  • Manzini, Paola, 1996. "Strategic bargaining with destructive power," Discussion Papers 9619, University of Exeter, Department of Economics.
  • Handle: RePEc:exe:wpaper:9619
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    References listed on IDEAS

    as
    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Holden, S., 1989. "Non-Cooperative Wage Bargaining," Papers 349, London School of Economics - Centre for Labour Economics.
    3. Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, I: Overview and Quantity Competition with Large Fixed Costs," Econometrica, Econometric Society, vol. 56(3), pages 549-569, May.
    4. Muthoo Abhinay, 1995. "Bargaining in a Long-Term Relationship with Endogenous Termination," Journal of Economic Theory, Elsevier, vol. 66(2), pages 590-598, August.
    5. Perry Motty & Reny Philip J., 1993. "A Non-cooperative Bargaining Model with Strategically Timed Offers," Journal of Economic Theory, Elsevier, vol. 59(1), pages 50-77, February.
    6. Busch, Lutz-Alexander & Wen, Quan, 1995. "Perfect Equilibria in Negotiation Model," Econometrica, Econometric Society, vol. 63(3), pages 545-565, May.
    7. Manzini, Paola, 1997. "Strategic wage bargaining with destructive power: the role of commitment," Economics Letters, Elsevier, vol. 54(1), pages 15-22, January.
    8. Avery Christopher & Zemsky Peter B., 1994. "Money Burning and Multiple Equilibria in Bargaining," Games and Economic Behavior, Elsevier, vol. 7(2), pages 154-168, September.
    9. Fernandez, Raquel & Glazer, Jacob, 1991. "Striking for a Bargain between Two Completely Informed Agents," American Economic Review, American Economic Association, vol. 81(1), pages 240-252, March.
    10. repec:fth:harver:1432 is not listed on IDEAS
    11. Sakovics Jozsef, 1993. "Delay in Bargaining Games with Complete Information," Journal of Economic Theory, Elsevier, vol. 59(1), pages 78-95, February.
    12. Lutz-Alexander Bush & Shouyong Shi & Quan Wen, 1998. "Bargaining with Surplus Destruction," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 915-932, November.
    13. repec:exe:wpaper:96/17 is not listed on IDEAS
    14. Haller, Hans & Holden, Steinar, 1990. "A letter to the editor on wage bargaining," Journal of Economic Theory, Elsevier, vol. 52(1), pages 232-236, October.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Mehrdad Vahabi, 2011. "The Economics of Destructive Power," Chapters, in: Derek L. Braddon & Keith Hartley (ed.), Handbook on the Economics of Conflict, chapter 5, Edward Elgar Publishing.
    2. Britz, Volker, 2018. "Rent-seeking and surplus destruction in unanimity bargaining," Games and Economic Behavior, Elsevier, vol. 109(C), pages 1-20.
    3. Mehrdad Vahabi, 2012. "Political Economy of Conflict Foreword," Revue d'économie politique, Dalloz, vol. 122(2), pages 153-169.
    4. Taiji Furusawa & Quan Wen, 2001. "Unique Inneficient Perfect Equilibrium in a Stochastic Model of Bargaining with Complete Information," Vanderbilt University Department of Economics Working Papers 0121, Vanderbilt University Department of Economics.
    5. Manzini, Paola & Mariotti, Marco, 2001. "Perfect Equilibria in a Model of Bargaining with Arbitration," Games and Economic Behavior, Elsevier, vol. 37(1), pages 170-195, October.
    6. Mehrdad Vahabi, 2009. "A Critical Review of Strategic Conflict Theory and Socio-political Instability Models," Revue d'économie politique, Dalloz, vol. 119(6), pages 817-858.
    7. Vahabi,Mehrdad, 2019. "The Political Economy of Predation," Cambridge Books, Cambridge University Press, number 9781107591370, April.
    8. Juan Vidal-Puga, 2005. "Reinterpreting the meaning of breakdown," Game Theory and Information 0501004, University Library of Munich, Germany.
    9. Volker Britz, 2016. "Destroying Surplus and Buying Time in Unanimity Bargaining," CER-ETH Economics working paper series 16/248, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    10. Paola Manzini & Marco Mariotti, 1997. "A Model of Bargaining with the Possibility of Arbitration," Game Theory and Information 9710001, University Library of Munich, Germany.
    11. Richter, Michael, 2014. "Fully absorbing dynamic compromise," Journal of Economic Theory, Elsevier, vol. 152(C), pages 92-104.
    12. Mehrdad Vahabi, 2012. "Avant-Propos," Revue d'économie politique, Dalloz, vol. 122(2), pages 135-151.
    13. Mehrdad Vahabi, 2009. "A Critical Review of Strategic Conflict Theory and Socio-political Instability Models," Revue d'économie politique, Dalloz, vol. 119(6), pages 817-858.
    14. Juan Vidal-Puga, 2008. "Delay in the alternating-offers model of bargaining," International Journal of Game Theory, Springer;Game Theory Society, vol. 37(4), pages 457-474, December.

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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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