Gradualism in Bargaining and Contribution Games

Olivier Compte, Philippe Jehiel
2004 The Review of Economic Studies  
We model bargaining situations in which parties have the option to terminate the negotiation, resulting in a termination outcome that depends on the offers made in the negotiation phase. The key features of the model are that 1) making a concession in the negotiation phase increases the other party's termination option payoff and 2) the termination outcome induces an efficiency loss as compared with a negotiated agreement. The main Þnding is that the mere threat of termination forces
more » ... concessions in the negotiation phase to be gradual, and the degree of gradualism is characterized. The model also applies to contribution games in which partial projects can be implemented. Our Þndings are contrasted with those appearing in the literature.
doi:10.1111/0034-6527.00311 fatcat:zvzpsco64nfelny4nzx3sncosu