Micro Theory Reading Group

Title: Searching for bargaining surplus

Abstract: We develop a novel bargaining model where different ``issues’’, feasible utility sets, arrive stochastically over time. Delay can occur as players hold up issues with high opponent value in order to extract concessions on future issues with high own value. Even without delay, efficiency is often lower than under independent committees, where each issue type is negotiated separately. Stopping new issues arriving whenever some are already available is still more efficient. Endogenizing new issues' arrival in a search model, however, we show both players typically search intensely when it’s cheap, despite this reducing efficiency. Higher search costs can improve efficiency.