Conferences at Department of Economics, University of Toronto, Canadian Economic Theory Conference 2025

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Commitment, Conflict, and Status Quo in Bargaining

Harry PEI*

Building: HEC Montréal - Édifice Hélène-Desmarais
Room: HEC
Date: 2025-05-02 11:30 am – 12:00 pm
Last modified: 2025-04-19

Abstract


Each period, two players bargain over a unit of surplus. Each player chooses between remaining flexible and committing to a take-it-or-leave-it offer at a cost. If players' committed demands are incompatible, then the current-period surplus is destroyed in the conflict. When both players are flexible, the surplus is split according to the status quo, which is the division in the last period where there was no conflict. We show that when players are patient and the cost of commitment is small, there exist a class of symmetric Markov Perfect equilibria that are asymptotically efficient and renegotiation proof, in which players commit to fair demands in almost all periods.