Bargaining with surplus destruction

In a two-player alternating-offer bargaining model, if one player can destr oy the surplus to be allocated, then the value to bargain for is endogenous , except at the beginning. Even with complete information, the model has pe rfect equilibria with delayed agreement and/or surplus destruction. The mod el therefore explains inefficiency and destruction that may appear irration al. We characterize the set of equilibrium payoffs and its limiting behavio ur as the time between offers vanishes. Real time delay remains possible ev en in the limit. We also consider the case of surplus destruction that is e xogenously limited by the time between offers. JEL Classification: C73, C78 .