Negotiation Statements with Promise and Threat

Kim, J.Y. Negotiation statements with promise and threat. Rev Econ Design (2021). https://doi.org/10.1007/s10058-021-00261-8

18 Pages Posted: 19 Apr 2019 Last revised: 1 Sep 2021

See all articles by Jin Yeub Kim

Jin Yeub Kim

Yonsei University - School of Economics

Date Written: February 9, 2021

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 China-US interaction. 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.

Keywords: negotiation, cooperation, promises, threats

JEL Classification: C72, D82, F51

Suggested Citation

Kim, Jin Yeub, Negotiation Statements with Promise and Threat (February 9, 2021). Kim, J.Y. Negotiation statements with promise and threat. Rev Econ Design (2021). https://doi.org/10.1007/s10058-021-00261-8, Available at SSRN: https://ssrn.com/abstract=3364031 or http://dx.doi.org/10.2139/ssrn.3364031

Jin Yeub Kim (Contact Author)

Yonsei University - School of Economics ( email )

Seoul
Korea, Republic of (South Korea)

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