Bargaining with Optimism
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 findin...
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| Format: | Article |
| Language: | en_US |
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Annual Reviews
2012
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| Online Access: | http://hdl.handle.net/1721.1/75393 https://orcid.org/0000-0002-7637-7117 |
| _version_ | 1826199317323448320 |
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| author | Yildiz, Muhamet |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Yildiz, Muhamet |
| author_sort | Yildiz, Muhamet |
| collection | MIT |
| description | 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. |
| first_indexed | 2024-09-23T11:17:55Z |
| format | Article |
| id | mit-1721.1/75393 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T11:17:55Z |
| publishDate | 2012 |
| publisher | Annual Reviews |
| record_format | dspace |
| spelling | mit-1721.1/753932022-10-01T02:40:36Z Bargaining with Optimism Yildiz, Muhamet Massachusetts Institute of Technology. Department of Economics Yildiz, Muhamet Yildiz, Muhamet 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. 2012-12-11T17:11:34Z 2012-12-11T17:11:34Z 2011-05 Article http://purl.org/eprint/type/JournalArticle 1941-1383 1941-1391 http://hdl.handle.net/1721.1/75393 Yildiz, Muhamet. “Bargaining with Optimism.” Annual Review of Economics 3.1 (2011): 451–478. Web. https://orcid.org/0000-0002-7637-7117 en_US http://dx.doi.org/10.1146/annurev-economics-061109-080334 Annual Review of Economics Creative Commons Attribution-Noncommercial-Share Alike 3.0 http://creativecommons.org/licenses/by-nc-sa/3.0/ application/pdf Annual Reviews Yildiz via Kate McNeill |
| spellingShingle | Yildiz, Muhamet Bargaining with Optimism |
| title | Bargaining with Optimism |
| title_full | Bargaining with Optimism |
| title_fullStr | Bargaining with Optimism |
| title_full_unstemmed | Bargaining with Optimism |
| title_short | Bargaining with Optimism |
| title_sort | bargaining with optimism |
| url | http://hdl.handle.net/1721.1/75393 https://orcid.org/0000-0002-7637-7117 |
| work_keys_str_mv | AT yildizmuhamet bargainingwithoptimism |