Abstract:
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 agreementsmade in equilibrium.
