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A Model of Negotiation, not Bargainig

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  • Rasmusen, E.

Abstract

Bargaining models ask how a surplus is split between two parties in bilateral monopoly. Much of real-world negotiation involves complications to the original split which may or may not increase the welfare of both parties. The parties must decide which complications to propose, how closely to examine the other side's proposals, and when to accept them. This type of negotiation raises welfare, rather than reducing it. This paper models negotiation as a two-period auditing game, and find a variety of plausible equilibria, some of which can be pareto-ranked. Expectations are highly important, and precommitment can increase welfare substantially.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Rasmusen, E., 1994. "A Model of Negotiation, not Bargainig," Papers 94-007, Indiana - Center for Econometric Model Research.
    • Handle: RePEc:fth:indian:94-007
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    game theory;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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