Strategic Effects and Incentives in Multi-issue Bargaining Games

1 Introduction

This paper investigates multi-issue bargaining games in which players attempt to
divide each surplus (or cake) as in the standard alternating-offer bargaining model
(Rubinstein, 1982). The bargaining is sequential, that is, negotiations over a second
surplus can start only after an agreement over the initial division has been reached
and the implementation of the agreement is sequential as well, that is, as soon as an
agreement is reached it can be implemented.

A similar framework has been investigated by Busch and Horstmann (1997, 1999),
Inderst (2000) and In an Serrano (2002, 2003). Their analyses conclude that parties
have conflicting preferences over agendas when they are restricted to choose among
sequential procedures and, as a result, a simultaneous procedure in which all the
issues are discussed at the same time is superior to any sequential procedure. In this
paper we show that parties can agree over which one is the best sequential procedure.
This consists in discussing the most important issue first, if only interior solutions
are allowed, but agreement over agendas can arise even when parties have different
evaluations of the issues (and corner solutions are allowed). Moreover, if there is a
difficult issue (a definition is in section 4), parties can only agree in postponing such
an issue, both in the cases of corner and interior solutions and even when players do
not agree over the importance of the issues.

These results are based on the following key assumptions. First, parties are al-

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