Suggested References
The following books offer practical guides to reaching mutually beneficial agreements.
Bazerman, M. H., and J. J. Gillespie. “Betting on the Future: The Virtues of Contingent Contracts.”
Harvard Business Review(September 1999): 155–160.
Fisher, R., W. Ury, and B. Patton. Getting to Yes.New York: Houghton Mifflin, 1992.
Shell, R. Bargaining for Advantage: Negotiation Strategies for Reasonable People.New York: Penguin, 2006.
The following are rigorous and readable texts on bargaining.
Brams, S. J. Negotiation Games: Applying Game Theory to Bargaining and Arbitration. New York: Rout-
ledge, 2003.
Osborne, M., and A. Rubinstein. Bargaining and Markets.Boston: Academic Press, 1990.
Raiffa, H. The Art and Science of Negotiation.Cambridge, MA: Harvard University Press, 1982.
Roth, A. (Ed.). Game-Theoretic Models of Bargaining.Cambridge, MA: Cambridge University Press,- (See especially the chapters by Chatterjee, Myerson, Samuelson, and Wilson.)
Schelling, T. C. The Strategy of Conflict.Chapters 2 and 3. Cambridge, MA: Harvard University
Press, 1990.
A rigorous treatment of bargaining theory is contained in
Kennan, J., and R. Wilson. “Bargaining with Private Information.” Journal of Economic Literature
(March 1993): 45–104.
Experimental and empirical evidence on bargaining is provided in
Babcock, L., and G. Loewenstein. “Explaining Bargaining Impasse: The Role of Self-Serving
Biases.” Journal of Economic Perspectives11 (Winter 1997): 109–126.
Camerer, C. F. Behavioral Game Theory,Chapters 2 and 4. Princeton, NJ: Princeton University
Press, 2003.
Cramton, P., and J. S. Tracy. “Strikes and Holdouts in Wage Bargaining: Theory and Data.” Amer-
ican Economic Review82 (1992): 100–121.
Roth, A. E. “Bargaining Experiments.” In J. H. Kagel and A. E. Roth (Eds.), The Handbook of Exper-
imental Economics, Princeton, NJ: Princeton University Press, 1995.
There are numerous Web sites offering negotiation resources and support. Among the best are
Harvard Law School’s Project on Negotiation, http://www.pon.harvard.edu/.
Stanford University’s Center on Conflict and Negotiation, http://www.stanford.edu/group/sccn/.
666 Chapter 15 Bargaining and NegotiationCHECK STATION
ANSWERS- Clearly, Warner must be paid by Harper to postpone the paperback
release, because the postponement will cost Warner five months’ worth of
paperback profits. The price, P, paid must at least cover this lost profit
(denoted by W); that is, P W. Harper, in turn, gains five months’
worth of hardcover profit from the agreement (call this profit H). It will
pay no more than the profit it gains: P H. Therefore, a mutually
beneficial agreement is possible if and only if WP H, that is, as
long as the extra hardcover profit exceeds the lost paperback profit. The
zone of agreement stretches from Wto H. Notice that changing the
date of the paperback release is a profitable response to an event that was
unforeseen—that this particular title would be such a hot seller. Once
this is known, extending the exclusive hardcover run becomes the profit-
maximizing course of action.
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