A Bargaining Model Based on the Commitment Tactic

This paper studies a one-shot, simultaneous-move bargaining game. Each bargainer makes a partial commitment (a share of the unit size cake that she would like to get), which can later be revoked at some cost to the player. The payoffs are defined, in part, by the Nash bargaining solution, where the feasible utility set is affected by the players' partial commitments. Under certain assumptions on the two cost-of-revoking functions, we establish that the model has a unique Nash equilibrium. It is shown that a player's equilibrium share of the cake is strictly increasing in her marginal cost of revoking a partial commitment. An application of our model selects a unique equilibrium in Nash's demand game. Journal of Economic Literature Classification Number: C78. 1996 Academic Press, Inc.