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Job Market Paper:
Threat, Commitment and Brinkmanship in Adversarial Bargaining (with Lucas Rentschler)
We study commitment strategies in adversarial bargaining, situations in which the proposer demands payment from the responder under the threat of a conflict. The bargaining environment is risky; a welfare-destroying conflict might randomly start during the negotiation, but it also can be induced by the proposer. The responder's loss in the conflict depends on the potency the proposer chooses, and it is maximized for a higher potency than the one that maximizes the proposer's benefit. The proposer has pre-commitment power to a potency given by audience costs. We show under which conditions the proposer commits to start the conflict as a threat to the responder and when she relies on the risky environment to threaten the responder. We also show that there might be a commitment trap: high pre-commitment power can be detrimental to the proposer. The proposer prefers a risky environment if she has high pre-commitment and a safer one in the opposite case.
I study how voluntary disclosure of information affects outcomes in plea bargaining. A prosecutor negotiates a sentence with a defendant who privately knows whether he is guilty or innocent. The prosecutor can gather evidence regarding the defendant's type during negotiations, and a trial assigns payoff depending on the evidence if they fail to reach an agreement. Voluntary disclosure induces endogenous second-order belief uncertainty. I show that a purely sentence-motivated prosecutor might disclose exculpatory evidence and that voluntary disclosure generates inefficient outcomes. Mandatory disclosure is socially preferable as outcomes are fairer and efficient. The prosecutor is better off under mandatory disclosure.
I study the role of the negotiation protocol in two-issues bargaining between two players, in which the pie only exists if both players contribute to its creation. The issues are the fraction of the pie, and the second is the pie itself, modeled as which project to choose. I examine three protocols–simultaneous, sequential, and incomplete bargaining–and show that the protocol does not play any role if the contribution cost of one player is high enough. I provide conditions under which the protocol plays a role and describe the equilibrium. I apply the model to discuss the allocation of control rights in early projects financed by venture capital.
I study a bargaining model between two players with endogenous probability of recognition and surplus. At each period they can make two types of effort: productive effort, that increases the surplus, and unproductive effort, which affects the probability of being recognized as the proposer. With convex effort cost players increase the surplus for some periods before ending the game. I characterize how the advantages of each player affect the effort decisions over time. I show that advantages in the unproductive effort affect the provision of both types of effort, but advantages in the productive effort only affect the effort decision regarding the productive effort. Different time preferences only affect productive efforts if the probability of recognition is not persistent, and both types of effort if it is.
Threat and Commitment in Adversarial Bargaining: Experimental Evidence (with Lucas Rentschler)
We experimentally study pre-commitment power's role in credible threatening in adversarial bargaining. A proposer demands payment from the responder, and if the responder rejects to pay, a conflict starts. Before the proposer makes the demand, she chooses the intensity of the conflict. A higher intensity makes both players worse off. The proposer is only partially committed to the intensity; if the conflict starts, she can reduce the intensity up to a fraction of it. In equilibrium, the proposer gains bargaining power by choosing an overly large intensity, which puts both players in a position of having a loss if the conflict starts. The data are qualitatively consistent with the theory. If pre-commitment power allows it, subjects choose a high intensity and tie their hands for the conflict. However, they chose a lower intensity than predicted. Although they gain bargaining power, it is not reflected in the payment they demand from the responder.
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