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Abstract:
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Two important issues in distributive bargaining theory are, first, the
conditions under which a negotiation breakdown occurs, and second, what and how
source of parties’ bargaining powers influences the properties of a possible agreement.
Research based on classicNash’s demand game has explored both questions by sophisticating
the original game a lot. As an attempt to deal with both issues under a simpler
framework, we propose a modification of the Nash demand game in which bargainers
suffer negative externalities proportional to the share of the surplus captured by their
rival. It is shown that the negotiator experiencing a relatively high externality level has
greater bargaining power and thus, appropriates a larger proportion of the surplus at
stake. However, if externality levels are sufficiently high, bargaining powers become
incompatible and a negotiation breakdown emerges from the bargaining process. We
compare our results with the previous literature, and argue that they can be especially
relevant in negotiations held under highly polarized environments. |