ABSTRACT
In the previous chapter, we studied the institutional structure of international debt renegotiation using a mechanism design approach. While that approach highlights the limits of what can be achieved within particular bargaining frameworks, it abstracts from the strategic behaviour of the parties in arriving at agreement. The model also implicitly assumes that the parties can commit to go no further than one round of bargaining. This is often not a realistic assumption, especially if it means that the parties are aware that potential mutual gains from agreement have to be forgone. In this chapter we use an extensive-form game to examine the set of actions available to the parties as they bargain over time, specifically looking at factors in the bargaining situation which are glossed over in the mechanism design approach.
