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American Economic Review: Vol. 98 No. 4 (September 2008)

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Commitment and Conflict in Bilateral Bargaining

Article Citation

Ellingsen, Tore, and Topi Miettinen. 2008. "Commitment and Conflict in Bilateral Bargaining." American Economic Review, 98(4): 1629-35.

DOI: 10.1257/aer.98.4.1629

Abstract

Building on previous work by Schelling and Crawford, we study a model of bilateral bargaining in which negotiators can make binding commitments at a low positive cost c. Most of our results concern outcomes that survive iterated strict dominance. If commitment attempts never fail, there are three such outcomes. In two of them, all the surplus goes to one player. In the third, there is a high probability of conflict. If commitment attempts succeed with probability q < 1, the unique outcome that survives iterated strict dominance entails conflict with probability q2. When c = 0, analogous results hold if the requirement of iterated strict dominance is replaced by iterated weak dominance. (JEL C78, D84)

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Authors

Ellingsen, Tore (Stockholm School of Economics)
Miettinen, Topi (Max Planck Institute of Economics, Jena)

JEL Classifications

C78: Bargaining Theory; Matching Theory
D74: Conflict; Conflict Resolution; Alliances


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