12. Bargaining
Reading
- Thinking Strategically (Avinash Dixit and Barry
Nalebuff), Chapter 11, Bargaining
- Packet: Krishna, Vijay, ``The 1987 NFL Strike'' Harvard case
no. 9-189-093, 9-189-094.
Central Idea:
Even if you know you would eventually cave in to the other side's
demands, the threat of delay can work to your advantage.
Antithesis:
If you know you're going to lose at the end of bargaining anyway, give
up immediately and cut your losses.
Topics That Might be Discussed in Class
- The 1987 NFL Strike
- Multiple Nash equilibria in the game "Splitting a
Pie"
- Incomplete Information and Multi-Dimensional Bargaining
Terms:
Multi-dimensional bargaining, Threat point,
Take-it-or-leave-it offer.
For Next Time
- Thinking Strategically (Avinash Dixit and Barry
Nalebuff), Chapter 12, Incentives, pp. 319-325
- McMillan, John, ``Bidding in Competition,'' pp. 133-149 of
Games, Strategies, and Managers, Oxford: Oxford
University Press, 1992.
Additional Material
- Rasmusen, Eric. "Explaining Incomplete Contracts as the
Result of Contract-Reading Costs," in the BE Press journal, Advances
in Economic Analysis and Policy. Vol. 1: No. 1, Article 2 (2001).
http://www.bepress.com/bejeap/advances/vol1/iss1/art2. Available in
Acrobat (*.pdf).
On the problem of "boobytrap" clauses in
negotiations.
- The bargaining protocol used in class and the Splitting a Pie
graphs in powerpoint.
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Rasmusen
. Last updated: March 23, 2002.