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Bargaining Frictions, Bargaining Procedures and Implied Costs in Multiple‐Issue Bargaining
Author(s) -
Busch LutzAlexander,
Horstmann Ignatius J.
Publication year - 1997
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/1468-0335.00105
Subject(s) - negotiation , economics , bargaining power , discounting , microeconomics , wage bargaining , bargaining problem , wage , labour economics , finance , political science , law
The paper explores how bargaining frictions and bargaining procedures interact to determine players’ bargaining costs in multiple‐issue bargaining settings. When bargaining frictions take the form of discounting and agreements are implemented as they are reached, issue‐by‐issue negotiation can generate bargaining costs different from those that occur if all issues are bargained simultaneously. These cost differences result in differences in allocations across bargaining procedures such that players disagree on the desired method of bargaining. Similar results hold for certain fixed‐cost bargaining friction specifications. This analysis provides a potential explanation of both agenda bargaining and incomplete contracts.