The optimal degree of commitment in a negotiation with a deadline (Q1424228)

The author considers a bargaining game with non perfect commitments and the degree of irrevocability of commitment as a choice variable. The starting point is the bilateral negotiation game by \textit{C. Fershtman} and \textit{D. Seidmann} [J. Econ. Theory 60, 306--321 (1993; Zbl 0793.90103)] who showed that perfect endogenous commitment by both players causes inefficient delay until the deadline whenever the players are sufficiently patient. In the paper under review, the nonstationary structure of bargaining is modified by allowing one player to possess imperfect commitments where the degree of commitment is chosen prior to the negotiation stage. The result is that a player optimally chooses an intermediate degree of irrevocability if the cost of increasing the degree of commitment is small enough. In such a situation an immediate agreement is reached and the commitment is effective in the sense that it improves the payoff of the committed player.