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Commitment and choice of partner in a negotiation with a deadline

Vicente Calabuig, Antoni Cunyat () and Gonzalo Olcina ()

Spanish Economic Review, 2002, vol. 4, issue 1, 61-78

Abstract: This paper analyses the effects of partially revocable endogenous commitments of a seller in a negotiation with a deadline. In particular, we examine when commitment is a source of strength, a source of inefficiency and when it does not affect the bargaining outcome at all. We show that when commitment possesses a minimum amount of irrevocability this crucially determines the bargaining outcome. In the bilateral bargaining case, commitment becomes a source of inefficiency since it causes a deadline effect. In the choice of partner framework, however, the deadline effect disappears and there is an immediate agreement and, moreover, commitment becomes a source of strength since it increases the seller's equilibrium payoff by triggering off competition between the buyers.

Keywords: Bargaining; revocable commitment; thin market; deadline effect (search for similar items in EconPapers)
JEL-codes: C78 D43 J52 (search for similar items in EconPapers)
Date: 2002-04-12
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