Bargaining with endogenous disagreement: The extended Kalai–Smorodinsky solution

Bozbay, Irem; Dietrich, Franz; Peters, Hans

doi:10.1016/j.geb.2011.06.007

Cited by 13 publications

(7 citation statements)

References 9 publications

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“…In the realm of bargaining, an existing strand of literature explores methods of generating endogenous disagreement points in bargaining problems, for example, Vartiainen (2007) and Bozbay et al (2012). The methods of endogenizing the disagreement point developed in this literature require strict convexity of the bargaining set.…”

Section: Related Literaturementioning

confidence: 99%

Multiself Bargaining

Henkel

2020

Studies in Microeconomics

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I propose a dual-self model in which two selves have conflicting preferences over the action to be taken by an agent. Departing from existing dual-self models, the two selves are treated symmetrically. They have identical instantaneous utility, and only differ in their time preference. The default action of the agent is modelled as the outcome of a Tullock contest among the selves, where the self who wins chooses their preferred action. Viewing the outcome of this contest as the point of disagreement, the selves are allowed to negotiate to a mutually preferred outcome, and this negotiation is modelled as a Nash bargaining problem. I show that multiple well documented ‘behavioural’ deviations from standard utility maximizing behaviour can be generated from this model, including time inconsistent behaviour such as diminishing impatience, as well as violations of independence of irrelevant alternatives in choice problems. Notably the preference reversals from time inconsistency are ‘smooth’, as opposed to the singular reversal in quasi-hyperbolic discounting, the standard model used in the literature. Further, the model implies correlation of these deviations due to their dependence on the same parameters. Finally, this approach provides insight on evaluating the welfare effects of various interventions.

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Section: Related Literaturementioning

confidence: 99%

Multiself Bargaining

Henkel

2020

Studies in Microeconomics

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“…Vartiainen (2007) studied bargaining problems without a disagreement point and characterized an extended solution concept which determines a disagreement outcome along with the solution. Bozbay et al (2012) assumed that the endogenously determined disagreement outcome plays the role of agents' mental reference points, representing their common beliefs of what would happen if they fail to reach an agreement. It is worth noting that, in both of these papers, reference points emerge during the bargaining stage, are only well-defined for the proposed bargaining solutions, hence are essentially different from the reference points described by Gupta and Livne (1988).…”

Section: Introductionmentioning

confidence: 99%

Endogenous reference points in bargaining

Karagözoğlu

Keskin

2018

Math Meth Oper Res

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We allow the reference point in (cooperative) bargaining problems with a reference point to be endogenously determined. Two loss averse agents simultaneously and strategically choose their reference points, taking into consideration that with a certain probability they will not be able to reach an agreement and will receive their disagreement point outcomes, whereas with the remaining probability an arbitrator will distribute the resource by using (an extended) Gupta-Livne bargaining solution (Gupta and Livne in Manag Sci 34:1303-1314, 1988). The model delivers intuitive equilibrium comparative statics on the breakdown probability, the loss aversion coefficients, and the disagreement point outcomes.

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“…Most theoretical and empirical analyses of bargaining assume that failure to reach an agreement results in a known disagreement allocation. Recent treatments in cooperative game theory have explored the implications of endogenizing the disagreement point as a function of the strategic environment (Bozbay et al, 2012;Vartiainen, 2007). In contrast, we explore an environment in which the disagreement point depends on private information and on the players' actions in the bargaining stage.…”

Section: Introductionmentioning

confidence: 99%

Collusion and information revelation in auctions

Llorente-Saguer

Zultan

2017

European Economic Review

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The theoretical literature on collusion in auctions suggests that the first-price mechanism can deter the formation of bidding rings. However, such analyses neglect to consider the effects of failed collusion attempts, wherein information revealed in the negotiation process may affect bidding behavior. We experimentally test a setup in which theory predicts no collusion and no information revelation in first-price auctions. The results reveal a hitherto overlooked failing of the firstprice mechanism: failed collusion attempts distort bidding behavior, resulting in a loss of seller revenue and efficiency. Moreover, the first-price mechanism does not result in less collusion than the second-price mechanism. We conclude that, while the features of the first-price mechanism may have the potential to deter bidder collusion, the role of beliefs in guiding bidding behavior make it highly susceptible to distortions arising from the informational properties of collusive negotiation. Auction designers should take this phenomenon into account when choosing the auction mechanism.

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Bargaining with endogenous disagreement: The extended Kalai–Smorodinsky solution

Cited by 13 publications

References 9 publications

Multiself Bargaining

Multiself Bargaining

Endogenous reference points in bargaining

Collusion and information revelation in auctions

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