We consider a simple trading relationship between an expectation-based loss-averse buyer and profit-maximizing sellers. When writing a long-term contract the parties have to rely on renegotiations in order to ensure materially efficient trade ex post. The type of the concluded long-term contract...

We study the framing effects of communication in multiparty bargaining. Communication has been shown to be more truthful and revealing than predicted in equilibrium. Because talk is preference-revealing, it may effectively frame bargaining around a logic of fairness or competition, moving...

Offers can increase in the ultimatum game if the recipient can select her proposer, both with non-competitive selection, where the recipient decides whether she wants to play with a single potential proposer, and even more so with competitive selection, where the recipient decides which of two...

We consider a bargaining environment where there is asymmetric information regarding whether the two players have common or conflicting preferences. If the cost of strategic communication is independent of the state, then signaling is not expected to be effective. If the uninformed agent...

We consider infinite-horizon bargaining in which an uninformed seller sequentially makes a price offer to a privately informed buyer who decides whether to accept or reject it in every bargaining round. Existing theories suggest that the presence (absence) of an arbitrarily small outside option...

I revisit the Rubinstein (1982) model for the classic problem of price haggling and show that bargaining can become a “trap,” where equilibrium leaves one party strictly worse off than if no transaction took place (e.g., the equilibrium price exceeds a buyer’s valuation). This arises when...

When lawsuits are resolved out of court, what determines the settlement price? This article uses a laboratory simulation and path analysis to estimate the relative importance of measurable variables in determining who wins the battle for the cooperative surplus. In the simulated negotiation...

We propose a theory of ex post inefficient renegotiation that is based on loss aversion. When two parties write a long-term contract that has to be renegotiated after the realization of the state of the world, they take the initial contract as a reference point to which they compare gains and...

In bargaining and negotiations, should one make the first offer or wait for the opponent to do it? Practitioners support the idea that moving first in bargaining is a mistake, while researchers find strong evidence that first-movers benefit from an anchor effect. This paper addresses these...

The paper studies bargaining games involving players with present-biased preferences. The paper shows that the relative timing of bargaining rewards and bargaining costs will determine whether the players’ present-bias will affect bargaining outcomes. In cases where players agree to a bargain...