, Volume 65, Issue 3, pp 227-252

A Theory of Agreements in the Shadow of Conflict: The Genesis of Bargaining Power

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Abstract

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 resulting from disagreement would be resolved. Our basic building block is the disagreement function, which maps each set of feasible outcomes into a disagreement point. Adding this function to the description of a bargaining problem, a weak axiom based on individual rationality leads to a unique solution: the agreement in the shadow of conflict, ASC. This agreement may be construed as the limit of a sequence of partial agreements, each of which is reached as a function of the parties’ relative power in the disagreement scenario. As a result, we identify a link between the circumstances of bargaining and the bargaining powers within it.

The rich get the law passed by means of force and arms or get it accepted by fear to their might, aren’t things this way? Plato, Republic.