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What is Strategic Outside Options in Bargaining about?

This paper presents a model of bilateral bargaining where one player can temporarily leave negotiations to search for an outside option. The player can choose to return to negotiations after searching. The model shows that whether the player can choose to return does not impact the equilibrium outcome. Specifically, the unique subgame perfect equilibrium implements an appropriately defined Nash bargaining solution, similar to when a player has a known outside option. This suggests assumptions in other model

Author

Manuel Alejandro Roa Romero

Language

EN