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Comparing Bargaining Solutions in the Shadow of Conflict: How Norms against Threats Can Have Real Effects

Anbarci, N.; Skaperdas, S.; Syropoulos, C.

Authors

S. Skaperdas

C. Syropoulos



Abstract

In many economic environments agents make costly and irreversible investments (in “guns”) that may enhance their respective threat payoffs but also shrink the utility possibilities set. In such settings, with variable threats and a variable utility possibilities set, it becomes possible to rank different bargaining solutions in terms of efficiency. We compare bargaining solutions within a class in which the influence of the threat point on the bargaining outcome varies across solutions. Under symmetry, we find that the solution in which the threat point is least influential—the equal sacrifice solution—Pareto-dominates the other solutions. Since the equal sacrifice solution puts the least weight on the threat point, norms against threats (that can be seen in many seemingly rhetorical pronouncements in adversarial relations) can mitigate some of the costs of conflict and therefore have efficiency-enhancing effects. Journal of Economic Literature Classification Numbers: C72, C78, D30, D70, D72, K42.

Citation

Anbarci, N., Skaperdas, S., & Syropoulos, C. (2002). Comparing Bargaining Solutions in the Shadow of Conflict: How Norms against Threats Can Have Real Effects. Journal of Economic Theory, 106(1), 1-16. https://doi.org/10.1006/jeth.2001.2828

Journal Article Type Article
Online Publication Date Sep 18, 2002
Publication Date 2002-09
Deposit Date Aug 17, 2018
Journal Journal of Economic Theory
Print ISSN 0022-0531
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 106
Issue 1
Pages 1-16
DOI https://doi.org/10.1006/jeth.2001.2828
Public URL https://durham-repository.worktribe.com/output/1322848