Arbeitspapier

Weakening the weak may harm the strong: A bargaining model where opting-in is costly

The opportunity to bargain often causes costs for at least one party in many economic situations, e.g. wage negotiations, joint ventures or interfirm cooperation. This paper studies such situations. A strong and a weak player have to agree how to divide the produced surplus. The weak player has to bear opting in costs. We characterize the set of subgame perfect equilibria. It is shown (i) that raising the costs of the weak party may strictly lower the payoff of the strong party, (ii) that for some cost levels the only equilibrium is inefficient, (iii) that if the players are sufficiently patient the outcomes of the zero-cost model and the vanishing costs version of our model do not coincide, and (iv) that in general multiplicity of equilibria arises.

Sprache
Englisch

Erschienen in
Series: Reihe Ökonomie / Economics Series ; No. 13

Klassifikation
Wirtschaft
Bargaining Theory; Matching Theory
Thema
noncooperative
bargaining

Ereignis
Geistige Schöpfung
(wer)
Riedl, Arno
Ereignis
Veröffentlichung
(wer)
Institute for Advanced Studies (IHS)
(wo)
Vienna
(wann)
1995

Handle
Letzte Aktualisierung
20.09.2024, 08:23 MESZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Riedl, Arno
  • Institute for Advanced Studies (IHS)

Entstanden

  • 1995

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