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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | The Effect of Sunk Costs on the Outcome of Alternating-Offers - Bargaining between Inequity-Averse Agents |
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| Institution | University of Zurich |
| Series Name | Working paper series / Institute for Empirical Research in Economics |
| Number | No. 203 |
| ISSN | 1424-0459 |
| Date | 2004 |
| Abstract Text | The paper analyzes the infinite-horizon alternating-offers bargaining game between agents with inequity-averse preferences. Without prior investments,nthe model predicts a shift of the outcome towards equal division. Asymmetricninvestments affect the ex-post bargaining outcome, giving an advantage to the party that contributed more. Under suitable circumstances, this effectnmay significantly mitigate the hold-up problem. In fact, in a symmetric setup, if production is sufficiently profitable, and parties are sufficiently patient, then the first-best investment levels can be approximated without a con |
| Official URL | http://www.econ.uzh.ch/wp.html |
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