The prevalence of take-it-or-leave-it offers

Shinsuke Kambe

Games and Economic Behavior, 2025, vol. 151, issue C, 42-58

Abstract: We study the effect of the option to exit in finite-horizon, two-person bargaining where players make offers alternatingly and incur fixed costs per period. We show that players use take-it-or-leave-it strategies in the unique equilibrium when there is no discounting. Expecting a low payoff at the next period as a respondent, a proposer would choose to exit after her demand were rejected. This causes her opponent to accept her take-it-or-leave-it offer. This prediction is generically valid even when the division at the final period is exogenously given, and is conditionally true when the cost of bargaining includes discounting.

Keywords: Take-it-or-leave-it offers; The option to exit; Alternating-offer bargaining; Fixed costs of bargaining; Finite-horizon bargaining (search for similar items in EconPapers)
JEL-codes: C78 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:151:y:2025:i:c:p:42-58

DOI: 10.1016/j.geb.2025.02.010

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