A theory of agreements in the shadow of conflict: The genesis of bargaining power

We present a novel approach to N-person bargaining, based on the idea that the agreement reached in a negotiation is determined by how the direct conflict We are thankful to Salvador Barberà, Jordi Brandts, Yeon-Koo Che, Joe Harrington, Carmen Herrero, Dan Kovenock, R. Vijay Krishna, Marco Mariotti, Rich McLean, Clara Ponsatí, Debraj Ray and especially to Andreu Mas-Colell, as well as to seminar participants at Alicante, Barcelona Jocs, the Barcelona ESF Exploratory Workshop on Bargaining, CORE, the Kenilworth ESRC Game Theory Meeting, NYU, PRIO(Oslo), Rutgers, the Scottish and Newcastle Theory Workshop and St. Andrews for helpful discussions. The first draft was written while Sákovics was at the Institut d’Anàlisi Econòmica (CSIC). Esteban gratefully acknowledges financial support from Barcelona Economics (CREA), the European Commission contract CIT2-CT-2004506084, the MCYT research grant SEC-2003-1961 and from the Generalitat de Catalunya. Corresponding author: Economics, University of Edinburgh, 50 George Square, Edinburgh, EH8 9JY, Scotland, United Kingdom. E-mail: [email protected]