1932

Abstract

Excessive optimism is a prominent explanation for bargaining delays. Recent results demonstrate that optimism plays a subtle role in bargaining, and its careful analysis may shed valuable insights into negotiation behavior. This article reviews some of these results, focusing on the following findings. First, when there is a nearby deadline, optimistic players delay the agreement to the last period before the deadline, replicating a broad empirical regularity known as the deadline effect. Second, there cannot be a substantial delay under persistent optimism; i.e., excessive optimism alone cannot explain delays. Third, when optimistic players are expected to learn during the negotiation, they delay the agreement in order to persuade their opponents. The delays in these results can be quite costly, Pareto inefficient, and common knowledge at the beginning of the game.

Keyword(s): delayheterogeneous priors
Loading

Article metrics loading...

/content/journals/10.1146/annurev-economics-061109-080334
2011-09-04
2024-03-29
Loading full text...

Full text loading...

/content/journals/10.1146/annurev-economics-061109-080334
Loading
/content/journals/10.1146/annurev-economics-061109-080334
Loading

Data & Media loading...

  • Article Type: Review Article
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error