'Take it or Leave it' Offers: Obstinacy and Endogenous Deadlines in Negotiations

38 Pages Posted: 10 Oct 2015

See all articles by Selcuk Ozyurt

Selcuk Ozyurt

Sabanci University; Harvard University

Date Written: August 12, 2015

Abstract

A bargainer uses "take it or leave it" offers to signal that he is not willing to make further concessions (commitment threat) and that he will leave the bargaining table unless his demand is accepted (exit threat). This paper investigates the impact of these threats on rational negotiators' equilibrium shares and behavior in a bilateral negotiation. The threats are credible because the negotiators are assumed to have the opportunity of mimicking obstinate types-who, for some reason, are constrained to implement their threats-and to build reputation on their obstinacy. The existence of the endogenous deadline option for one of the players has two main effects: (1) it renders the deal unique and efficient, and (2) shifts the bargaining power towards the player who can influence the deadline.

Keywords: Bargaining, Reputation, War of attrition, Continuous-time, Exit, Commitment, Behavioral types.

JEL Classification: C78, D82, C72

Suggested Citation

Ozyurt, Selcuk, 'Take it or Leave it' Offers: Obstinacy and Endogenous Deadlines in Negotiations (August 12, 2015). Available at SSRN: https://ssrn.com/abstract=2671411 or http://dx.doi.org/10.2139/ssrn.2671411

Selcuk Ozyurt (Contact Author)

Sabanci University ( email )

SSBF
Orhanli Tuzla
İstanbul, 34956
Turkey

HOME PAGE: http://myweb.sabanciuniv.edu/ozyurt/

Harvard University ( email )

Littauer Center
Cambridge, MA 02138
United States

HOME PAGE: http://myweb.sabanciuniv.edu/ozyurt/

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