DP15406 Agenda-Setter Power Dynamics: Learning in Multi-Issue Bargaining

Author(s): T. Renee Bowen, Ilwoo Hwang, Stefan Krasa
Publication Date: October 2020
Keyword(s): Bargaining, Gridlock, learning, Power
JEL(s): C78, D72, D74, D83
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15406

We study a dynamic bargaining model between a fixed agenda-setter and responder over successive issues. If the responder rejects the setter's proposal, the setter can attempt to assert her will to implement her ideal and will succeed with a probability that depends on her "personal power". The players learn about the setter's power as gridlock persists. Gridlock occurs when the setter's perceived power is either too high or too low, and the players reach compromise in an intermediate interval of beliefs. The presence of "difficult" issues can induce more compromise as the players have incentives to avoid learning.