Bargaining with Surplus Destruction

Lutz-Alexander Bush, Shouyong Shi and Quan Wen ()

Canadian Journal of Economics, 1998, vol. 31, issue 4, 915-932

Abstract: In a two-player alternating-offer bargaining model, if one player can destroy the surplus to be allocated, then the value to bargain for is endogenous, except at the beginning. Even with complete information, the model has perfect equilibria with delayed agreement and/or surplus destruction. The model, therefore, explains inefficiency and destruction that may appear irrational. The authors characterize the set of equilibrium payoffs and its limiting behavior as the time between offers vanishes. Real time delay remains possible even in the limit. The authors also consider the case of surplus destruction that is exogenously limited by the time between offers.

JEL-codes: C73 C78 (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (17)

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