Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25607
Authors: 
Ellingsen, Tore
Miettinen, Topi
Year of Publication: 
2007
Series/Report no.: 
Jena economic research papers 2007,037
Abstract: 
Can two negotiators fail to agree when both the size of the surplus and the rationality of the negotiators are common knowledge? We show that the answer is affirmative. When the negotiators can make irrevocable commitments at a low but positive cost, the unique symmetric equilibrium entails disagreement with high probability. In the unique pair of pure strategy equilibria, one party gets all the surplus. Even though we impose no constraints on side-payments, efficient compromises are unattainable. A strongly asymmetric authority relationship is thus the only viable alternative to costly conflict.
Subjects: 
Authority
Bargaining
Commitment
Disagreement
Transaction Costs
JEL: 
C72
C78
Document Type: 
Working Paper

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