In: Economics
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The main issue that controls the player in bargaining situation is the need to reach agreement or exactly how to corporate each player should like to reach some agreement rather than disagree and not raise an agreement,but his player would also like to reason agreement that is an as favorable to that individual as possible it is visible that the players will strike and agreement only after some costly delay or indeed help to reach an agreement as it witnessed by the history of this agreement and costly delay agreements in many real life situation
Bargaining is any process through which the player try to reset an agreement. This process is typically time-consuming and involves the players making offers and counter offer to each other, any theory of bargaining focus on the efficiency and distribution properties of the outcome of bargaining. The former property relates to the possibility in that the players fail to reach an agreement or they reach and agreement after some costly delay.
Example of costliest agreement include when a wage agreement is reached after the lost production do the longs trike and when the peace settlement is negotiated after the loss of life through war. The distribution property relates to the issue of exactly how the gains from Corporation are divided between the players.
The principle of bargaining theory is set out to determine the role of areas key factors are variables on bargaining outcome (and its efficiency and distribution properties) as they determine the sources of players bargaining power
Method of Bargaining impatience measurement
The period discount factor, 0 < & < 1, provides a means of evaluating future money amounts in terms of current equivalent money amounts. • Suppose a player values a $1 offer now as equivalent to $1(1+r) one period later. The discount factor in this case is: & =1/(1+r), since & ×$1=$1/(1+r) now = $1 later. • If r is high, & is low: players discount future money amounts heavily, and are therefore very impatient. • If r is low, & is high; players regard future money almost the same as current amounts of money and are more patient (less impatient).
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