A Unique and Robust Social Contract: An Application to Negotiations with Probabilistic Conflicts

Jin Yeub Kim
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Jin Yeub Kim: Yonsei Univ

No 2021rwp-187, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: This paper considers social contracts (or mechanisms) in negotiations with incomplete information in which an outside option is a probabilistic conflict and a peaceful agreement is ex ante efficient. Applications include partnership, labor-management bargaining, pretrial negotiations, and international negotiations. I compute the set of interim incentive efficient mechanisms, the ex ante incentive efficient mechanism, as well as the neutral bargaining solution. I numerically illustrate that the focus on the ex ante incentive efficient mechanism as the most reasonable prediction is not robust. This paper justifies the neutral bargaining solution as the unique, robust solution among all interim incentive efficient mechanisms.

Keywords: Negotiation; Social contracts; Incomplete information; Incentive efficiency; Neutral bargaining solution (search for similar items in EconPapers)
JEL-codes: C78 D74 D82 F51 J52 (search for similar items in EconPapers)
Pages: 23pages
Date: 2021-08
New Economics Papers: this item is included in nep-cta, nep-gth, nep-isf and nep-mic
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