Deadline Effects and Inefficient Delay in Bargaining with Endogenous Commitment

Negotiations often take time, thereby delaying the implementation of agreements which are to the mutual advantage of the bargaining partners. If the negotiators are all impatient, then these delayed agreements must be inefficient, as all participants must strictly prefer an immediate agreement on the same terms. The inefficiency of delayed agreements poses an important explanatory question: Why would the eventual terms not be proposed and accepted at the outset if the mutual losses could be foreseen? This problem has a long history in economics, going back at least as far as Hicks [14]. One consequence of Hicks's authoritative formulation is that this theoretical problem has historically been linked to the empirically important (but special) questions of why and when strikes occur. (See, in particular, Kennan's [15] extensive survey.)