Negotiation as the Art of the Deal

90 Pages Posted: 30 Apr 2018

See all articles by Matthew O. Jackson

Matthew O. Jackson

Stanford University - Department of Economics; Santa Fe Institute; Canadian Institute for Advanced Research (CIFAR)

Hugo Sonnenschein

Stanford University - Department of Economics

Yiqing Xing

Johns Hopkins University - Carey Business School

Christis Tombazos

Monash University - Department of Economics

Omar Al-Ubaydli

George Mason University - Department of Economics

Date Written: April 1, 2018

Abstract

Negotiation is a ubiquitous and consequential form of economic interaction. It is deal-making in the absence of a designer. We propose a theory of negotiation in which deals have many aspects. This leads to new results showing that efficient trade is possible even with substantial asymmetric information, which we show via both theory and experiments. In a robust class of settings of asymmetric information, the benefits of identifying areas of mutual gain redirect agents away from posturing and manipulating their share of the pie towards growing the pie. We show that equilibria are efficient, with significant implications for applications.

Keywords: Negotiation, Bargaining, Exchange, Trade, Multiple Items, Linking, Efficiency, Experiment

JEL Classification: A13, C72, C78, D47, D82, C92

Suggested Citation

Jackson, Matthew O. and Sonnenschein, Hugo and Xing, Yiqing and Tombazos, Christis G. and Al-Ubaydli, Omar, Negotiation as the Art of the Deal (April 1, 2018). Available at SSRN: https://ssrn.com/abstract=3153853 or http://dx.doi.org/10.2139/ssrn.3153853

Matthew O. Jackson (Contact Author)

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
1-650-723-3544 (Phone)

HOME PAGE: http://www.stanford.edu/~jacksonm

Santa Fe Institute

1399 Hyde Park Road
Santa Fe, NM 87501
United States

Canadian Institute for Advanced Research (CIFAR) ( email )

180 Dundas Street West, Suite 1400
Toronto, Ontario
Canada

Hugo Sonnenschein

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

Yiqing Xing

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://yiqingxing.com

Christis G. Tombazos

Monash University - Department of Economics ( email )

Wellington Road
Clayton, Victoria 3
Australia

Omar Al-Ubaydli

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States
703-993-4538 (Phone)
703-993-1133 (Fax)

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