Threats and promises in bargaining

Bobby (Wing Yin) Chung and Daniel H. Wood

Journal of Economic Behavior & Organization, 2019, vol. 165, issue C, 37-50

Abstract: If, prior to bargaining, bargainers can make commitments that have some chance of binding their bargaining behavior, they may want to threaten to reject low offers, promise to accept high offers, or both. We show that the timing of commitment attempts influences the goal of the commitments and the likelihood that incompatible threats result in impasse. Sequential commitments enable the player who commits first to make a moderate threat that convinces the second mover not to respond with a threat himself. The moderate threat requires a promise to not renege on the offer if the committed player would otherwise have incentives to deviate. This combination of tactics is not feasible when commitments are made simultaneously.

Keywords: Bargaining; Commitment; Promises; Threats; Endogenous timing (search for similar items in EconPapers)
JEL-codes: C73 C78 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:165:y:2019:i:c:p:37-50

DOI: 10.1016/j.jebo.2019.07.002

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