Waiting to settle: Multilateral bargaining with subjective biases

Bargaining with Optimism

“…This section presents the main result of Ali (2006): in multilateral bargaining there may be some delay even under constant level of optimism because the backward induction process becomes unstable. I will also brie ‡y present the main idea of a result by Galasso (2010) that establishes that in multilateral bargaining, optimism may increase or decrease the amount of delay depending on which aspect of bargaining power the player is optimistic about.…”

“…In order to avoid the "folk-theorem style"multiple equilibria in multilateral bargaining, Ali (2006) focuses on the …nite-horizon case.…”

“…Under persistent optimism (without learning and deadlines), many results conclude that there must be an immediate agreement. Even in the studies that establish ine¢ cient delays without learning and deadlines (such as Ali (2006) and Ortner (2010)), the amount of delay goes to zero in the continuous-time limit. 2 The rationale for this is as follows.…”

“…Even in the studies that establish ine¢ cient delays without learning and deadlines (such as Ali (2006) and Ortner (2010)), the amount of delay goes to zero in the continuous-time limit. 2 The rationale for this is as follows. When players are optimistic about the future, the range of individually rational agreements is quite narrow.…”

Over My Dead Body: Bargaining and the Price of Dignity

“…Finally, there is also a recent literature on bargaining and contracting with heterogenous beliefs (e.g., Yildiz (2003), (2004), Ali (2006)). The general motivation of these papers is also to understand the sources of delays and breakdowns, but it methods and focus are quite different.…”