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The Role of External Search in Bilateral Bargaining
Shirish D. Chikte and Sudhakar D. Deshmukh
Vol. 35, No. 2 (Mar. - Apr., 1987), pp. 198-205
Published by: INFORMS
Stable URL: http://www.jstor.org/stable/170691
Page Count: 8
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We consider the problem of bargaining between two individuals who can also search for possible alternatives to each other's offers. We explicitly incorporate the search activity into the process of bargaining: a disagreement in bargaining will lead each individual to search for an outside offer in the hope of improving his future bargaining position and attaining a more favorable outcome. We model the interlaced phases of bargaining and search over time as an extensive noncooperative game. We characterize the associated subgame-perfect equilibrium outcome and strategies. Finally, we show that superior search ability yields an individual a more favorable outcome and hence represents a greater bargaining strength.
Operations Research © 1987 INFORMS