Abstract
We study dismissal power in a simple bargaining model. Player 1 makes a policy proposal which player 2 may approve or reject. A proposal contains a random component. If the proposal is approved, then, after the policy realization, one of the two players can dismiss the agreement. First, we show that dismissal power causes inefficiency. Second, if player 1 (proposer) holds dismissal power, then dismissal power hurts player 1. Third, if player 2 holds dismissal power, then dismissal power benefits that player if the gains from bargaining are small, or moderate. Finally, we study a general model where player 1 can choose the full distribution of a proposal.
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