Search results for "Positive probability"
showing 3 items of 3 documents
BARGAINING WITH COMMITMENT UNDER AN UNCERTAIN DEADLINE
2006
We consider an infinite horizon bargaining game in which a deadline can arise with positive probability and where players possess an endogenous commitment device. We show that for any truncation of the game, the equilibrium agreement can only take place if the deadline arises within this finite horizon. Since the deadline is an uncertain event, the equilibrium exhibits agreements which are delayed with positive probability.
Partially revocable commitments in a negotiation with a deadline
2004
Abstract [Fershtman, C., Seidmann, D., 1993. Deadline effects and inefficient delay in bargaining with endogenous commitment. Journal of Economic Theory 60, 306–321] showed that the presence of an irrevocable endogenous commitment with a fixed deadline results in the so called deadline effect. In this paper we analyse the effects of partially revocable endogenous commitments of a seller in an infinite horizon negotiation in which a deadline can arise with positive probability. We obtain that when the commitment possesses a sufficiently large revocable part not only the inefficient delays disappear and an immediate agreement is reached but also the commitment has a value. On the other hand, …
Expectation Damages and Bilateral Cooperative Investments
2012
We examine the efficiency of the standard breach remedy expectation damages in a setting where the buyer invests cooperatively and the seller invests both cooperatively and selfishly. Contracts may specify a required quality level and an upper bound to the seller's coordination costs. We find that it is optimal to write an augmented Cadillac contract in which quality is stipulated such that it cannot be met with positive probability together with a very low price. Thus, the seller becomes a residual claimant and the coordination-cost threshold can be used to balance the incentives of the buyer.