Joint Outside Options
Queen Mary & Westfield College Working Paper No. 401
41 Pages Posted: 2 Dec 1999
Date Written: February 1999
Several contractual situations are such that the parties may 'step out' of negotiations and take up outside opportunities only if there is mutual consent to do so. Examples include employer-employee negotiations, divorce and inheritance procedures, and arbitration. To analyse such cases we develop the general concept of a 'joint outside option' and study its effect in the standard bargaining game. Examples from the economics of divorce and theory of the firm are considered in some depth.
JEL Classification: C78
Suggested Citation: Suggested Citation