A Model of Negotiation, Not Bargaining

Eric Rasmusen () and .

Game Theory and Information from University Library of Munich, Germany

Abstract: Bargaining models ask how a surplus is split between two parties in bilateral monopoly. Much of real-world negotiation involves complications to the original split which may or may not increase the welfare of both parties. The parties must decide which complications to propose, how closely to examine the other side's proposals, and when to accept them. This type of negotiation raises welfare, rather than reducing it. This paper models negotiation as a two-period auditing game, and find a variety of plausible equilibria, some of which can be pareto-ranked. Expectations are highly important, and precommitment can increase welfare substantially.

JEL-codes: C7 D8 (search for similar items in EconPapers)
Date: 1995-06-14, Revised 1995-06-14
Note: A 64KB LaTeX file. A postscript file is available on request from Erasmuse@Indiana.edu.
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Related works:
Working Paper: A Model of Negotiation, not Bargainig (1994)
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