Bargaining and negative externalities
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Two important issues in distributive bargaining theory are, first, the conditions under which a negotiation breakdown occurs, and second, what and how source of parties’ bargaining powers influences the properties of a possible agreement. Research based on classicNash’s demand game has explored both questions by sophisticating the original game a lot. As an attempt to deal with both issues under a simpler framework, we propose a modification of the Nash demand game in which bargainers suffer negative externalities proportional to the share of the surplus captured by their rival. It is shown that the negotiator experiencing a relatively high externality level has greater bargaining power and thus, appropriates a larger proportion of the surplus at stake. However, if externality levels are sufficiently high, bargaining powers become incompatible and a negotiation breakdown emerges from the bargaining process. We compare our results with the previous literature, and argue that they can be especially relevant in negotiations held under highly polarized environments.
Artículo de publicación ISI
DOI: DOI 10.1007/s11590-010-0267-x