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Endogenous bargaining power

Joan Esteban () and József Sákovics ()

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We present a novel approach to N-person bargaining, based on the idea that the agreement reached in a negotiation is determined by how the direct conflict resulting from disagreement would be resolved. Our basic building block is the disagreement function, which maps each set of feasible outcomes into a disagreement point. Using this function and a weak axiom based on individual rationality we reach a unique solution: the agreement in the shadow of conflict, ASC. This agreement may be construed as the limit of a sequence of partial agreements, each of which is reached as a function of the parties’ relative power. We examine the connection between ASC and asymmetric Nash solutions. We show the connection between the power of the parties embodied in the ASC solution and the bias in the SWF that would select ASC as an asymmetric Nash solution.

Keywords: Bargaining; conflict; disagreement (search for similar items in EconPapers)
JEL-codes: C78 D74 (search for similar items in EconPapers)
Date: 2002-02
New Economics Papers: this item is included in nep-cdm, nep-gth and nep-pol
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