This Article Full Text (PDF) References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Similar articles in Web of Science Alert me to new issues of the journal Add to Saved Citations Download to citation manager Request Permissions Request Reprints Add to My Marked Citations Citing Articles Citing Articles via Google Scholar Citing Articles via Scopus Google Scholar Articles by Butler, C. K. Search for Related Content Social Bookmarking                         What's this?

Prospect Theory and Coercive Bargaining

Department of Political Science, University of New Mexico, Albuquerque

Despite many applications of prospect theory's concepts to explain political and strategic phenomena, formal analyses of strategic problems using prospect theory are rare. Using Fearon's model of bargaining, Tversky and Kahneman's value function, and an existing probability weighting function, I construct a model that demonstrates the differences between expected value and prospect theory when applied to strategic interaction. Critically important to this demonstration is an examination of different types of reference points that make sense for bargaining problems. Four types of reference points are discussed and analyzed: power-based, equity, variants of the status quo, and extreme ``I-want-it-all'' reference points. Each of these types of reference points produce different bargaining behavior at the individual level and in combination with the type of reference point of the other actor. Additionally, I demonstrate that bargaining failure is possible for this model under complete and perfect information using prospect-theoretic logic.

Key Words: prospect theory • game theory • bargaining • reference points

Journal of Conflict Resolution, Vol. 51, No. 2, 227-250 (2007)
DOI: 10.1177/0022002706297703


CiteULike    Complore    Connotea    Del.icio.us    Digg    Reddit    Technorati    Twitter    What's this?