The Role of the Status-Quo in Dynamic Bargaining

We analyze a dynamic bargaining game where parties can agree to implement a policy change, which is costly (beneficial) in the short-run but beneficial (costly) in the long-run. When the status-quo is endogenized (at least in some components), we show that the more farsighted party can induce their...

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Bibliographic Details
Published in:Games 2023-06, Vol.14 (3), p.35
Main Author: Flamini, Francesca
Format: Article
Language:English
Subjects:
Agreements
Asymmetry
Bargaining
Budgets
Compromises
Consumption
Contract negotiations
Depreciation
Equilibrium
Game theory
Investment
Investments
Political parties
status-quo
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Summary:We analyze a dynamic bargaining game where parties can agree to implement a policy change, which is costly (beneficial) in the short-run but beneficial (costly) in the long-run. When the status-quo is endogenized (at least in some components), we show that the more farsighted party can induce their rival to accept the short-run costs of policy changes designed to generate benefits in the long-run. This is more common when players’ asymmetries are less pronounced, the status-quo is fully endogenized and the state depreciates more quickly.
ISSN:2073-4336
2073-4336
DOI:10.3390/g14030035