Arbeitspapier
Contracting with Externalities and Outside Options
This paper proposes a model of multilateral contracting where players are engaged in two parallel interactions: they dynamically form coalitions and play a repeated normal form game with temporary and permanent decisions. This formulation encompasses many economic models with externalities and outside options. We show that when outside options are pure (i.e. independent of the actions of other players), there exists a Markov Perfect equilibrium resulting in efficient outcomes when players become perfectly patient. If outside options are not pure, all Markov perfect equilibria may be inefficient. The distribution of coalitional gains and the dynamics of coalition formation are characterized in four illustrative applications.
- Language
-
Englisch
- Bibliographic citation
-
Series: Nota di Lavoro ; No. 78.2004
- Classification
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Wirtschaft
Cooperative Games
Noncooperative Games
Bargaining Theory; Matching Theory
Externalities
- Subject
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Outside options
Externalities
Coalitional bargaining
Verhandlungstheorie
Vertragstheorie
Koalition
Theorie
Normalformspiel
- Event
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Geistige Schöpfung
- (who)
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Bloch, Francis
Gomes, Armando
- Event
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Veröffentlichung
- (who)
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Fondazione Eni Enrico Mattei (FEEM)
- (where)
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Milano
- (when)
-
2004
- Handle
- Last update
-
10.03.2025, 11:45 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Bloch, Francis
- Gomes, Armando
- Fondazione Eni Enrico Mattei (FEEM)
Time of origin
- 2004
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