NOW OR LATER? - An Analysis of the Timing of Threats in Bargaining

Siegfried K. Berninghaus and Werner Güth ()

Discussion Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group

Abstract: The variable threat-bargaining model of Nash (1953) assumes that threats in the sense of binding commitments as to what one will do if bargaining ends in conflict, are chosen before bargaining. By comparision, late threats to be chosen after bargaining end in conflict, appear more natural and would be self-enforcing, i.e., require no commitment power. Instead of exogenously imposing the timing of threats, they are derived endogenously as in indirect evolution or endogenous timing. Based on a duopoly market, we first derive the equilibrium for all possible constellations regarding the timing of threats. From these results we can show that the evolutionary analysis surprisingly justifies the early timing of threats as suggested by Nash (1953).

Keywords: Cooperative Bargaining; Thread Points in Bargaining; Timing of Decisions (search for similar items in EconPapers)
JEL-codes: C71 D43 D74 (search for similar items in EconPapers)
Date: 2002-08
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