Amit Dekel

Two players split a pie. They do not follow a bargaining protocol and need not reach agreement. Instead, each is free to attempt to seize control and impose her preferred partition. Which partitions will players seek to impose? How hard will they fight to do so? We propose a model in which preferences depend on counterfactual choices: a player's payoff from imposing a partition depends on her belief about the partition the other would have chosen had she been in control; symmetrically, her payoff from a partition imposed by the other depends on her belief about her own counterfactual choice. Requiring these beliefs to be correct pins down players' intended partitions. Taking these as given, players decide whether, and how intensively, to engage in conflict over control. The model provides a succinct alternative to bargaining models and accommodates a wide range of natural social preferences.