Multiparty Bargaining Strategies: Comparing Nash Bargaining Payoffs of Bilateral and Multilateral Negotiation Strategies during Conflict Bargaining

Abstract

Since 2003, the United States and North Korea have been at odds over the creation and continuation of a North Korean nuclear weapons program. While North Korea lobbies strongly for these differences to be sorted out through bilateral negotiations between the two nations, the United States refuses to partake in any negotiations other than the multilateral Six-Party Talks. Seeking to determine if the bargaining framework (bilateral or multilateral) between several economic agents might grant one or more agents a strategic advantage, we developed a three-player bargaining model for both a single multilateral negotiation and for a series of bilateral negotiations involving all three players. We also included in our model “conflict coefficients” which can simulate disagreement erupting into damaging conflict between two players. Hence, our model can further simulate nations on the brink of armed conflict, companies at risk of entering a price war, or other scenarios where players might cause a decrease in each other’s initial wealth or utility. Conflict coefficients were designed in such a way that they can be removed from the model effortlessly to attain more general results. We concluded that there are indeed strategic advantages and disadvantages of multilateral and bilateral bargaining games for each player depending on their disagreement points and the surpluses being divided. In cases of conflict bargaining, expected payoffs for each player and preferred bargaining framework are further affected by their own conflict coefficient and those of the other players.