Bargaining over an Endogenous Surplus

25 Pages Posted: 1 Jun 2022

Date Written: May 25, 2022

Abstract

I study a bargaining model between two players with endogenous probability of recognition and surplus. At each period they can make two types of effort: productive effort, that increases the surplus, and unproductive effort, which affects the probability of being recognized as the proposer. With convex effort cost players increase the surplus for a finite number of periods before ending the game. I characterize how the advantages of each player affect the effort decisions over time. I show that advantages in the unproductive effort affect the provision of both types of effort, but advantages in the productive effort only affect the effort decision regarding the productive effort. Different time preferences only affect productive efforts if the probability of recognition is not persistent, and both types of effort if it is.

Keywords: Bargaining, endogenous recognition, endogenous pie, investment.

JEL Classification: C73, C78, D72

Suggested Citation

Cuellar, Pablo, Bargaining over an Endogenous Surplus (May 25, 2022). Available at SSRN: https://ssrn.com/abstract=4120727 or http://dx.doi.org/10.2139/ssrn.4120727

Pablo Cuellar (Contact Author)

Utah State University ( email )

Logan, UT 84322
United States

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