How Status Seeking may Prevent Coasean Bargaining

Even in a world with zero transaction costs, status seeking can prevent efficient Coasean bargaining. Using simple illustrations and various examples, we show that ignoring this impediment can explain the failure of some negotiations where an efficient bargain seems a priori reachable and expected. Rather than just emphasizing this neglected issue, we discuss various institutional and behavioral strategies by which this impediment can be overcome and even strategically used in socially desirable directions, such as bargaining over status.