Abstract
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.
| Original language | English |
|---|---|
| Pages (from-to) | 149-164 |
| Number of pages | 16 |
| Journal | Review of Economic Design |
| Volume | 26 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 2022 Jun |
Bibliographical note
Funding 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.
Publisher Copyright:
© 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)