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Explaining Different Bargaining Outcomes
Consider two separate negotiations over a $100 prize. In both negotiations, the rules are identical: Person 1 proposes a split, and Person 2 can either accept it (and the money is divided as proposed) or reject it (and neither person receives anything).
- Situation A: Person 1 offers a split of $99 for themselves and $1 for Person 2. Person 2 rejects the offer.
- Situation B: Person 1 offers a split of $99 for themselves and $1 for Person 2. Person 2 accepts the offer.
Given that the rules of the negotiation were the same in both situations, analyze the key factor that most likely explains why the outcomes were different.
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Economics
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Introduction to Microeconomics Course
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CORE Econ
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Explaining Different Bargaining Outcomes
In any negotiation, the final outcome is influenced by the 'rules of the game' (the institutional structure of the interaction) and the 'preferences' of the participants (their personal values, such as fairness or self-interest). For each scenario described in the left column, match it to the primary determinant in the right column that best explains the behavior or outcome.
True or False: In a one-time negotiation to split a sum of money, if the only preference of both participants is to maximize their own personal gain, the specific process used for the negotiation (e.g., who makes the first offer, whether counter-offers are allowed) will not affect the final division of the money.
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