Strategic Effects and Incentives in Multi-issue Bargaining Games

lowed to differ not only in their evaluations of the issues, but also in their rates of time
preference. Moreover, after reaching an agreement over an issue there is an interval
of time before players attempt to reach an agreement over another issue¹ . In another
paper, Flamini (2001), we consider a similar framework, additionally, we allow side
payments. In other words, a party can make very large concessions at the initial
stage if his overall payoff is non-negative. In this paper, we exclude side-payments
and, at most, a party can leave the entire surplus to his opponent. We investigate the
interplay of the forces in this game (with interior and corner solutions) and show that
parties can have the same preferences over sequential procedure. They can prefer the
same agenda not only when there is consensus over the importance of the issues (as
in the case of side payments), but also when they disagree over the importance of the
issues (and corner solutions are allowed).

These results are not obvious, since there are many different strategic effects that
parties need to take into account in choosing their strategies (key features are how
different their relative and absolute valuations of the issues are and how different their
time preferences are). As a result players may have different incentives: a player may
prefer to postpone an issue if unimportant to him but important to his opponent,
or he may prefer to postpone an issue important to both parties if relatively more

¹ As Muthoo (1995) points out, in general, not only does this interval exist but it is often larger
than the interval of time between a rejection and a new proposal.

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