Microeconomics · free preview
Bargaining
Two parties split a surplus, bargaining power comes from cheap walk-away options and real influence over the partner, and the Nash split shares the gains over the disagreement point while commitment and information move the outcome.
1. The surplus and the walk-away points
The surplus and the walk-away points
2. The Nash split
The Nash split
3. Threats, patience and commitment
Threats, patience and commitment
4. Where bargains live
Where bargains live
5. Computing the Nash split
The kitchen earns 100, Ana's outside option is 20 and Ben's is 10. What split does the Nash bargaining solution with equal weights produce?
6. The improving alternative
Ben's own stall improves from 10 to 40 while everything else stays fixed. What happens to the Nash split of the kitchen's 100?
7. The ultimatum extreme
Ana makes Ben a single take-it-or-leave-it offer for the whole surplus of 70 and Ben's outside option is zero. What does standard backward induction predict, and what do experiments show?
8. The levers of power
Which combination most increases a negotiator's bargaining power?
9. The surplus to split
A joint project is worth 100 thousand dollars, Ana walks away at 20 and Ben at 10. Compute the surplus over the disagreement point in thousands, and write the number.
10. The proposer's take
In the kitchen worth 100 with outside options 20 and 10, Ana can make a credible take-it-or-leave-it offer giving Ben exactly his outside option. Compute what Ana keeps, and write the number.
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