Chapter 16 Flashcards
strategic views
characterizes bargaining as a formal game of chicken where the ability to commit to a position gives one player bargaining power over its rivals
other bargaining view
alternatives to agreement that determine the terms of agreement, regardless of the precise form of the negotiation
strategic view of bargaining
two possible strategies - bargaining hard or accomodate
suggests that if you can commit to a position, you can capture a bigger share of the gains of the agreement
bargaining hard
each will earn nothing
accomodate
split the gains from trade
if one bargains hard and the other accomodates
then the one who bargained hard takes 75% gains from agreement
credible commitments
are difficult to make because it requires players to commit to a course of action against their self interest
labor union game
first mover advantage game
first mover advantage
by moving first, equivalently, by committing a bargain hard, the union can capture most gains of trade
simultaneous move game
symmetric, therefore management can commit to lock out the union if they receive a low offer.
This completely changes the outcome of the game. and will push the union to accept a generous offer.
committing to a lock out
sounds simple but sometimes difficult to persuade and have the union pursue an otherwise unprofitable offer
the best threat is
the one you never have to use
the outcome of strategic game of bargaining lies in who moves _______ and who can ________ to a position
first
commit
axiomatic
nonstrategic view of bargaining
non straitening rules of bargaining
does not depend on the rules of the bargaining game or whether players can commit to a position
to improve your own bargaining position
improve your outside option or decrease that of your opponent
nonstrategic view of bargaining
if you can decrease your own gain to reaching agreement by improving your outside option, you become a tougher bargainer because you have less to gain by reaching agreement.
ex: the best time to ask for a raise is when you have an attractive offer from another company D1 is big.
disagreement value - think of
opportunity cost.
ex: if you get a job offer from another company, the cost of staying at your job is the offer you give up to stay.
strike threats are more common during ______________, when it would hurt the firm more than it would hurt the union.
seasonal peaks in demand
