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Ilia Tsetlin
Professor of Decision Sciences
Keywords
Search ; Ultimatum ; Exploding Offer ; Deadlines ; Outside Alternatives ; Search Deterrence ; Acceptance Deterrence
Journal Article
The authors model two agents who can benefit from a mutual deal or partnership, yet are also searching for outside alternatives. This generic situation is observed in various settings (e.g., the job market for experts) and involves several decisions. The proposer decides not only on the timing, deadline, and value of her offer but also on how to handle her outside alternatives; the responder decides whether to accept the proposer’s offer (if any) and how to handle his own outside alternatives. A responder holding an offer with a long deadline becomes more selective when evaluating outside alternatives, an effect we call acceptance deterrence.