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Reinterpreting The Meaning Of Breakdown

  • Juan J. Vidal Puga

    (Universidade de Vigo)

Alternating bargaining has been extensively used to model two-sidednegotiations. The celebrated model of Rubinstein (1982) has provided a formaljustification for equitable payoff division. A typical assumption of these models underrisk is that the breakdown event means a complete and irrevocable halt in negotiations.We reinterpret the meaning of breakdown as the imposition to finish negotiationsimmediately. Specifically, after breakdown the last offer becomes definitive. WhileRubinstein¿s model predicts an immediate agreement with stationary strategies, weshow that the same payoff allocation is attainable under non-stationary strategies.Moreover, the payoffs in delayed equilibria are potentially better for the proposer thanthose in which agreement is immediately reached.

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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2006-22.

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Length: 21 pages
Date of creation: Nov 2006
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2006-22
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  1. Avner Shaked, 1994. "Opting out: bazaars versus "hi tech" markets," Investigaciones Economicas, Fundación SEPI, vol. 18(3), pages 421-432, September.
  2. Manzini, Paola, 1999. "Strategic bargaining with destructive power," Economics Letters, Elsevier, vol. 65(3), pages 315-322, December.
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  4. Clara Ponsati & Jozsef Sakovics, 2000. "Randomly Available Outside Options in Bargaining," ESE Discussion Papers 63, Edinburgh School of Economics, University of Edinburgh.
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  6. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, May.
  7. Mauleon, Ana & Vannetelbosch, Vincent, 2004. "Bargaining with endogenous deadlines," Journal of Economic Behavior & Organization, Elsevier, vol. 54(3), pages 321-335, July.
  8. Yossi Feinberg & Andrzej Skrzypacz, 2005. "Uncertainty about Uncertainty and Delay in Bargaining," Econometrica, Econometric Society, vol. 73(1), pages 69-91, 01.
  9. 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.
  10. Jehiel, Philippe & Moldovanu, Benny, 1995. "Negative Externalities May Cause Delay in Negotiation," Econometrica, Econometric Society, vol. 63(6), pages 1321-35, November.
  11. Olivier Compte & Philippe Jehiel, 2002. "On the Role of Outside Options in Bargaining with Obstinate Parties," Econometrica, Econometric Society, vol. 70(4), pages 1477-1517, July.
  12. Fershtman Chaim & Seidmann Daniel J., 1993. "Deadline Effects and Inefficient Delay in Bargaining with Endogenous Commitment," Journal of Economic Theory, Elsevier, vol. 60(2), pages 306-321, August.
  13. Paola Manzini & Marco Mariotti, 2004. "Going Alone Together: Joint Outside Options in Bilateral Negotiations," Economic Journal, Royal Economic Society, vol. 114(498), pages 943-960, October.
  14. Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-64, November.
  15. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
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