Durability, Deadline, and Election Effects in Bargaining

Alp Simsek and Muhamet Yildiz ()

No 22284, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We propose a tractable model of bargaining with optimism. The distinguishing feature of our model is that the bargaining power is durable and changes only due to important events such as elections. Players know their current bargaining powers, but they can be optimistic that events will shift the bargaining power in their favor. We define congruence (in political negotiations, political capital) as the extent to which a party's current bargaining power translates into its expected payoff from bargaining. We show that durability increases congruence and plays a central role in understanding bargaining delays, as well as the finer bargaining details in political negotiations. Optimistic players delay the agreement if durability is expected to increase in the future. The applications of this durability effect include deadline and election effects, by which upcoming deadlines or elections lead to ex-ante gridlock. In political negotiations, political capital is highest in the immediate aftermath of the election, but it decreases as the next election approaches.

JEL-codes: C73 C78 D74 D78 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-cdm, nep-gth, nep-mic and nep-pol
Note: POL LE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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