Coordination and bargaining power in contracting with externalities. (English) Zbl 1151.91456
Summary: Building on G. Genicot and D. Ray [J. Econ. Theory 131, No. 1, 71–100 (2006; Zbl 1142.91458)] we develop a model of non-cooperative bargaining that combines the two main approaches in the literature of contracting with externalities: the offer game (in which the principal makes simultaneous offers to the agents) and the bidding game (in which the agents make simultaneous offers to the principal). Allowing for agent coordination, we show that the outcome of our bargaining procedure may differ remarkably from those of the offer and the bidding games. In particular, we find that bargaining can break agents’ coordination and that the principal’s payoff can be decreasing in his own bargaining power.
MSC:
| 91B26 | Auctions, bargaining, bidding and selling, and other market models |
| 91A40 | Other game-theoretic models |
| 91B40 | Labor market, contracts (MSC2010) |
| 91A10 | Noncooperative games |
Citations:
Zbl 1142.91458References:
| [1] | Bergermann, D.; Valimaki, J., Dynamic common agency, J. Econ. Theory, 111, 23-48 (2003) · Zbl 1052.91028 |
| [2] | Bernheim, D.; Peleg, B.; Whinston, M., Coalition-proof Nash equilibria I. Concepts, J. Econ. Theory, 42, 1-12 (1987) · Zbl 0619.90090 |
| [3] | Bernheim, D.; Whinston, M., Menu auctions, resource allocations, and economic influence, Quart. J. Econ., 101, 1-31 (1986) · Zbl 0586.90108 |
| [4] | Bernheim, D.; Whinston, M., Coalition-proof Nash equilibria II. Applications, J. Econ. Theory, 42, 13-29 (1987) · Zbl 0619.90091 |
| [5] | Fernandez, R.; Glazer, J., Striking for a bargain between two completely informed agents, Amer. Econ. Rev., 81, 240-252 (1991) |
| [6] | Fudenberg, D.; Tirole, J., Game Theory (1998), The MIT Press: The MIT Press Cambridge, MA · Zbl 0939.91004 |
| [7] | Genicot, G.; Ray, D., Contracts and externalities: How things fall apart, J. Econ. Theory, 131, 71-100 (2006) · Zbl 1142.91458 |
| [8] | Jun, B. H., Non-cooperative bargaining and union formation, Rev. Econ. Stud., 56, 59-76 (1989) · Zbl 0658.90011 |
| [9] | Katz, M.; Shapiro, C., How to license intangible property, Quart. J. Econ., 100, 567-589 (1986) |
| [10] | Martimort, D.; Stole, L., Contractual externalities and common agency equilibria, Advances in Theoretical Economics, 3, 1 (2003), Article 4 |
| [11] | Möller, M., The timing of contracting with externalities, J. Econ. Theory, 133, 484-503 (2007) · Zbl 1280.91104 |
| [12] | A. Prat, A. Rustichini, Sequential common agency, working paper, 1998; A. Prat, A. Rustichini, Sequential common agency, working paper, 1998 |
| [13] | Rasmusen, E. B.; Ramseyer, J. M.; Wiley, J. S., Naked exclusion, Amer. Econ. Rev., 81, 1137-1145 (1991) |
| [14] | Rubinstein, A., Perfect equilibrium in a bargaining model, Econometrica, 50, 97-109 (1982) · Zbl 0474.90092 |
| [15] | Segal, I., Contracting with externalities, Quart. J. Econ., 114, 337-388 (1999) · Zbl 0953.91026 |
| [16] | Segal, I., Coordination and discrimination in contracting with externalities: Divide and conquer?, J. Econ. Theory, 113, 147-181 (2003) · Zbl 1059.91055 |
| [17] | Segal, I.; Whinston, M., Robust predictions for bilateral contracting with externalities, Econometrica, 71, 757-791 (2003) · Zbl 1152.91630 |
| [18] | Sutton, J., Non-cooperative bargaining theory: An introduction, Rev. Econ. Stud., 53, 709-724 (1986) · Zbl 0641.90093 |
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. In some cases that data have been complemented/enhanced by data from zbMATH Open. This attempts to reflect the references listed in the original paper as accurately as possible without claiming completeness or a perfect matching.
