Explaining the Shift in Bargaining Power
In a negotiation where one person (the Proposer) offers to split a sum of money with another (the Responder), explain the primary reason why the Proposer's bargaining position becomes stronger when they can make the same offer to two competing Responders instead of just one.
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Ch.4 Strategic interactions and social dilemmas - The Economy 2.0 Microeconomics @ CORE Econ
Ch.5 The rules of the game: Who gets what and why - The Economy 2.0 Microeconomics @ CORE Econ
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A Proposer has $100 to divide. In Scenario A, the Proposer makes a take-it-or-leave-it offer to a single Responder. If the Responder accepts, the money is split as proposed; if they reject, both get $0. In Scenario B, the Proposer makes the same take-it-or-leave-it offer to two competing Responders. The first Responder to accept the offer gets that amount, and the Proposer keeps the rest; if both reject, everyone gets $0. Based on an analysis of these two situations, how would the amount offered by a rational, self-interested Proposer most likely change from Scenario A to Scenario B?
In a bargaining scenario where one person makes a take-it-or-leave-it offer simultaneously to two other individuals, a person who rejects a low offer can be certain that their action will prevent the offer-maker from receiving any payment.
Negotiation Strategy Analysis
The Impact of Competition on Bargaining Outcomes
Explaining the Shift in Bargaining Power
Consider a bargaining game where a Proposer makes a take-it-or-leave-it offer. Match each element of the game to the most likely outcome when a second, competing Responder is added to the scenario, changing it from a one-on-one negotiation to a one-on-two negotiation.
When a second, competing Responder is introduced into a take-it-or-leave-it bargaining scenario, the original Responder's power to punish an unfair offer is diminished. This shift in power typically allows the ________ to secure a larger portion of the total amount being divided.
Negotiation Strategy Shift
When a second, competing Responder is introduced into a take-it-or-leave-it bargaining scenario, the original Responder's power to punish an unfair offer is diminished. This shift in power typically allows the ________ to secure a larger portion of the total amount being divided.
Contract Negotiation Strategy