A negotiator, in order to achieve her goal, must induce an agent to cooperate. The agent faces costs or risks for cooperating. I develop a game-theoretic model where the negotiator may issue a negotiation statement that contains a threat of punishment for non-cooperation and a promise of reward for cooperation; after which the agent must choose either to cooperate or not. I derive necessary and sufficient conditions under which combining a threat with a promise is effective and credible in inducing the agent’s full cooperation. I discuss insights from the model in the context of two applications. My analysis provides a rationale for the use of both promise and threat in negotiations to establish cooperation, increasing the chance of achieving the negotiator’s goal.
|Number of pages||16|
|Journal||Review of Economic Design|
|Publication status||Published - 2022 Jun|
Bibliographical noteFunding Information:
I am deeply grateful to Roger Myerson for sharing his insights and encouraging me to write this paper. I thank Hülya Eraslan for a general suggestion on the paper. I appreciate three anonymous referees for many insightful comments. Funding source declaration: This work was supported by the Yonsei University Research Grants of 2020 and 2021.
© 2021, The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.
All Science Journal Classification (ASJC) codes
- Economics, Econometrics and Finance(all)