We propose an elementary theory of wars fought by fully rational contenders. Two parties play a Markov game that combines stages of bargaining with stages where one side has the ability to impose surrender on the other. Under uncertainty and incomplete information, in the unique equilibrium of...

We study the incentive to invest to improve marriage prospects, in a frictionless marriage market with non-transferable utility. Stochastic returns to investment eliminate the multiplicity of equilibria in models with deterministic returns, and a unique equilibrium exists under reasonable...

In a market in which sellers compete by posting mechanisms, we study how the properties of the meeting technology affect the mechanism that sellers select. In general, sellers have incentive to use mechanisms that are socially efficient. In our environment, sellers achieve this by posting an...

In many markets, sellers advertise their good with an asking price. This is a price at which the seller will take his good off the market and trade immediately, though it is understood that a buyer can submit an offer below the asking price and that this offer may be accepted if the seller...

In many decentralised markets, the traders who benefit most from an exchange do not employ intermediaries even though they can easily afford them. For other traders, those who benefit little from trade, intermediaries are too expensive. Together, these observations lead to empirically observed...

We propose a new bargaining solution, based on the idea - borrowed from Hobbes - that the agreement reached in a negotiation should be determined by how the direct conflict resulting from disagreement would be resolved. The explicit modeling of the disagreement game directly leads to the...

We consider a matching model of the labour market where workers that differ in quality send signals to firms that are also vertically differentiated. Signals allow assortative matching in which the highest quality workers send the highest signals and are hired by the best firms. Matching is...

This paper studies bargaining and conflict under incomplete information, provides an overview and a critical account of the literature on the topic and contributes with original research. We first revise models of mechanism design and sequential bargaining that take confrontation as final....

We consider an extension of the standard Rubinstein model where both players are randomly allowed to leave the negotiation after a rejection, in which case they obtain a payoff known value. We show that, when the value of the outside opportunities is of intermediate size, there exist a continuum...

We accomplish two goals. First, we provide a non-cooperative foundation for the use of the Nash bargaining solution in search markets. This finding should help to close the rift between the search and the matching-and-bargaining literature. Second, we establish that the diversity of quality...