Open- versus Closed-Door Negotiations

Motty Perry and Larry Samuelson

RAND Journal of Economics, 1994, vol. 25, issue 2, 348-359

Abstract: We examine a noncooperative bargaining between two agents, one of whom (agent 1) represents a constituency. Under "closed-door" bargaining, constituents must approve the final bargaining agreement. In the "open-door" case, constituents may also terminate bargaining after intermediate offers have been made and rejected. A "learning effect" and a "termination effect" arise in open-door bargaining. The former increases and the latter decreases the payoff to agent 2 from rejecting offers. The termination effect dominates, making agent 2 less likely to reject offers and hence making agent 1 more aggressive in the open-door case.

Date: 1994
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Working Paper: Open Versus Closed Door Negotiations (1993)
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