Journal Article

Gradualism in Bargaining and Contribution Games

Olivier Compte and Philippe Jehiel

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 71, issue 4, pages 975-1000
Published in print October 2004 | ISSN: 0034-6527
Published online October 2004 | e-ISSN: 1467-937X | DOI:
Gradualism in Bargaining and Contribution Games

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  • Game Theory and Bargaining Theory


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This paper identifies a source of gradualism in bargaining and contribution games. In the bargaining games we examine, each party can opt out at any time, and the outside option outcome is assumed to depend on the offers made in the negotiation phase. Specifically, we assume that (1) making a concession in the negotiation phase increases the other party's outside option pay-off and (2) the outside option outcome induces an efficiency loss as compared with a negotiated agreement. The main finding is that the mere presence of such history-dependent outside options forces equilibrium concessions in the negotiation phase to be gradual, and the degree of gradualism is characterized. The model also applies to contribution games in which the outside option may be interpreted as the option to implement a partial project using the total contributions made so far.

Keywords: C73; C78

Journal Article.  12857 words.  Illustrated.

Subjects: Game Theory and Bargaining Theory

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