Prenegotiation public commitment in domestic and international bargaining

We use a formal bargaining model to examine why, in many domestic and international bargaining situations, one or both negotiators make public statements in front of their constituents committing themselves to obtaining certain benefits in the negotiations. We find that making public commitments provides bargaining leverage, when backing down from such commitments carries domestic political costs. However, when the two negotiators face fairly similar costs for violating a public commitment, a prisoner's dilemma is created in which both sides make high public demands which cannot be satisfied, and both negotiators would be better off if they could commit to not making public demands. However, making a public demand is a dominant strategy for each negotiator, and this leads to a suboptimal outcome. Escaping this prisoner's dilemma provides a rationale for secret negotiations. Testable hypotheses are derived from the nature of the commitments and agreements made in equilibrium.

Competing manufacturers in a retail supply chain: On contractual form and coordination

It is common for a retailer to sell products from competing manufacturers. How then should the firms manage their contract negotiations? The supply chain coordination literature focuses either on a single manufacturer selling to a single retailer or one manufacturer selling to many (possibly competing) retailers. We find that some key conclusions from those market structures do not apply in our setting, where multiple manufacturers sell through a single retailer. We allow the manufacturers to compete for the retailer's business using one of three types of contracts: a wholesale-price contract, a quantity-discount contract, or a two-part tariff. It is well known that the latter two, more sophisticated contracts enable the manufacturer to coordinate the supply chain, thereby maximizing the profits available to the firms. More importantly, they allow the manufacturer to extract rents from the retailer, in theory allowing the manufacturer to leave the retailer with only her reservation profit. However, we show that in our market structure these two sophisticated contracts force the manufacturers to compete more aggressively relative to when they only offer wholesale-price contracts, and this may leave them worse off and the retailer substantially better off. In other words, although in a serial supply chain a retailer may have just cause to fear quantity discounts and two-part tariffs, a retailer may actually prefer those contracts when offered by competing manufacturers. We conclude that the properties a contractual form exhibits in a one-manufacturer supply chain may not carry over to the realistic setting in which multiple manufacturers must compete to sell their goods through the same retailer. © 2010 INFORMS.

The enduring impact of transient emotions on decision making

People often do not realize they are being influenced by an incidental emotional state. As a result, decisions based on a fleeting incidental emotion can become the basis for future decisions and hence outlive the original cause for the behavior (i.e., the emotion itself). Using a sequence of ultimatum and dictator games, we provide empirical evidence for the enduring impact of transient emotions on economic decision making. Behavioral consistency and false consensus are presented as potential underlying processes. © 2009 Elsevier Inc. All rights reserved.