The bargaining trap

Sebastian Schweighofer-Kodritsch

I revisit the Rubinstein (1982) model for the classic problem of price haggling and show that bargaining can become a "trap," where equilibrium leaves one party strictly worse off than if no transaction took place (e.g., the equilibrium price exceeds a buyer's valuation). This arises when one party is impatient about capturing zero surplus (e.g., Rubinstein's example of fixed bargaining costs). Augmenting the protocol with unilateral exit options for responding bargainers generally removes the trap.

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Year of publication:	August 2022
Authors:	Schweighofer-Kodritsch, Sebastian
Publisher:	Munich, Germany : CESifo, Center for Economic Studies & Ifo Institute
Subject:	alternating offers \| bargaining \| time preferences \| haggling costs \| outside options \| Verhandlungstheorie \| Bargaining theory \| Tarifverhandlungen \| Collective bargaining \| Verhandlungen \| Negotiations \| Intertemporale Entscheidung \| Intertemporal choice

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Extent:	1 Online-Ressource (circa 16 Seiten) Illustrationen
Series:	CESifo working papers. - München : [Verlag nicht ermittelbar], ISSN 2364-1428, ZDB-ID 2065232-X. - Vol. no. 9903 (2022)
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Graue Literatur ; Non-commercial literature ; Arbeitspapier ; Working Paper
Language:	English
Other identifiers:	hdl:10419/265938 [Handle]
Classification:	C78 - Bargaining Theory; Matching Theory ; D03 - Behavioral Economics; Underlying Principles ; D74 - Conflict; Conflict Resolution; Alliances
Source:	ECONIS - Online Catalogue of the ZBW

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