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The Role of the Status-Quo in Dynamic Bargaining

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  • Francesca Flamini

    (Economics, Adam Smith Business School, University of Glasgow, Glasgow G12 8QQ, UK)

Abstract

We analyze a dynamic bargaining game where parties can agree to implement a policy change, which is costly (beneficial) in the short-run but beneficial (costly) in the long-run. When the status-quo is endogenized (at least in some components), we show that the more farsighted party can induce their rival to accept the short-run costs of policy changes designed to generate benefits in the long-run. This is more common when players’ asymmetries are less pronounced, the status-quo is fully endogenized and the state depreciates more quickly.

Suggested Citation

  • Francesca Flamini, 2023. "The Role of the Status-Quo in Dynamic Bargaining," Games, MDPI, vol. 14(3), pages 1-20, April.
    • Handle: RePEc:gam:jgames:v:14:y:2023:i:3:p:35-:d:1134997
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    References listed on IDEAS

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    1. T. Renee Bowen & Ying Chen & H?lya Eraslan, 2014. "Mandatory versus Discretionary Spending: The Status Quo Effect," American Economic Review, American Economic Association, vol. 104(10), pages 2941-2974, October.
    2. Francesca Flamini, 2020. "Divide and Invest: Bargaining in a Dynamic Framework," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 37(1), pages 121-153, November.
    3. Sorger, Gerhard, 2006. "Recursive Nash bargaining over a productive asset," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2637-2659, December.
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    5. Mr. Davide Malacrino & Luigi Pistaferri, 2021. "Labor Market Reforms and Earnings Dynamics: the Italian Case," IMF Working Papers 2021/142, International Monetary Fund.
    6. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, September.
    7. Ram Fishman, 2019. "Heterogeneous Patience, Bargaining Power and Investment in Future Public Goods," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(4), pages 1101-1107, August.
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