We examine multilateral bargaining in vertical supply relationships that involve an upstream manufacturer who sells through two competing retailers. In these relationships the negotiations are ...interdependent, and bargaining externality may arise across the retailers. In addition, the timing by which the manufacturer negotiates with the retailers becomes important. In simultaneous bargaining the retailers negotiate without knowing if an agreement has been reached in the other retail channel, whereas in sequential bargaining the retailer in the second negotiation is able to observe whether an agreement was reached in the first negotiation. We show that simultaneous bargaining is optimal for the manufacturer when the retail prices (and profitability) are similar, and sequential bargaining is preferred when the dispersion in the retail prices is sufficiently large. As a result of ex post renegotiations, the manufacturer may strategically stock out the less profitable retailer who charged a relatively low retail price and exclusively supply only the retailer who charged a relatively high retail price and maintained high channel profitability. Moreover, ex post multilateral bargaining can buffer downstream competition and thus lead to positive retail profits even in markets that are close to perfect competition.
This review of the theoretical literature on legislative and multilateral bargaining begins with presentation of the seminal Baron-Ferejohn model. The review then encompasses the extensions to ...bargaining among asymmetric players in terms of bargaining power, voting weights, and time and risk preferences; spatial bargaining; bargaining over a stochastic surplus; bargaining over public goods; legislative bargaining with alternative bargaining protocols in which players make demands, compete for recognition, or make counterproposals; and legislative bargaining with cheap talk communication.
Package deals in multi‐issue bilateral bargaining Rapoport, Amnon; Seale, Darryl A.; Kugler, Tamar ...
Journal of behavioral decision making,
January 2023, 2023-01-00, 20230101, Volume:
36, Issue:
1
Journal Article
Peer reviewed
This manuscript proposes a novel mechanism of multi‐issue bilateral bargaining under incomplete information. A single seller and single buyer negotiate the prices of multiple items by submitting ...offers and counteroffers in which the items are traded as a package deal. Trade occurs if the sum of the individual profits across all items is non‐negative. We experimentally compare a simultaneous protocol, where the two sets of price offers are submitted simultaneously, to a sequential protocol, where traders exchange offers and counteroffers with a deadline before submitting independently their final asks and bids. Our results show that the participants concluded more trades under the sequential protocol, that they shaved their price offers considerably, and that they often traded‐off price offers, sustaining negative profit on one or more of their items to increase their expected total profit.
Take-it or leave-it offers are probably as old as mankind. Our objective here is, first, to provide a, probably subjectively colored, recollection of the initial ultimatum game experiment, its ...motivation and the immediate responses. Second, we discuss extensions of the standard ultimatum bargaining game in a unified framework, and, third, we offer a survey of the experimental ultimatum bargaining literature containing papers published since the turn of the century. The paper argues that the ultimatum game is a versatile tool for research in bargaining and on social preferences. Finally, we provide examples for open research questions and directions for future studies.
Raiffa's solution to the bargaining problem, outlined in Luce and Raiffa (1957), is the point where the negotiation curve - a sequence of points that constitute step-by-step improvements from the ...status quo in the feasible payoff space - meets (possibly in the limit) the efficient boundary of the feasible region. A bargaining model with interim agreements yields a negotiation curve in equilibrium (in the spirit of Raiffa), and as the bargaining frictions disappear, the Raiffa path of payoffs converges to the Nash solution.
Complementarity is common in land-assembly problems, such as a developer buying the entirety of apartment units to complete a development project. Holdout (delay or block of projects by sellers) is ...common in these problems under unanimity-rule. Motivated by the recent policy practices in strata-sales, we introduce a new bargaining model with quota-rule. We show that under quota-rule, there is no holdout when there are two sellers or players are sufficiently patient. No-holdout equilibrium is unique, efficient and yields immediate sale of all goods as outcome. When quota rule is used, efficient equilibrium is still obtained under alternative bargaining protocols and with multiple sellers. We also show that the no-holdout result is not due to the specific bargaining protocol.
We conduct an experiment to investigate how the timing of communication affects bargaining outcomes and dynamics in a majoritarian, sequential bargaining game. Our data show that allowing for ...free-form written communication at the proposal-making stage leads to higher proposer power and minimum winning coalitions compared to when communication is possible at the voting stage only. Absent communication, outcomes fall in between both communication timings. Voting patterns reveal that the timing of communication affects how subjects evaluate proposals, as they are more likely to vote in favor under proposal-stage communication than under voting-stage communication all else equal. In general, communication affects bargaining dynamics in that voters retaliate more strongly against failed proposers, compared to the no communication baseline. We provide a detailed description of communication content, the medium utilized to communicate, and how the volume and timing of messages affects outcomes. Our results underscore the importance of an in-depth analysis of processes and dynamics to understand bargaining behavior, because even when communication may lead to outcomes that resemble equilibrium, the strategies employed by subjects need not.
This paper studies infinite-horizon sequential bargaining among n≥3 players in which a proposer is randomly selected from the pool of potential proposers. If the proposal is rejected, the current and ...previous proposers are excluded from the pool of potential proposers, and the game moves on to the next round until every player has had the same number of opportunities to be the proposer. To analyze the model with a particular time dependency within each sequence of n rounds (a cycle), I characterize the stationary equilibrium of a stochastic game, which I call cycle-stationary subgame perfect (CSSP) equilibrium. The CSSP equilibrium is unique in payoffs and analogous to the subgame perfect equilibrium of some forms of finite-horizon bargaining. Even when every player is entirely patient, the proposer's share in the CSSP equilibrium is smaller than that predicted by the stationary equilibrium of the Baron–Ferejohn legislative bargaining model.
How much income would a woman living alone require to attain the same standard of living that she would have if she were married? What percentage of a married couple's expenditures are controlled by ...the husband? How much money does a couple save on consumption goods by living together versus living apart? We propose and estimate a collective model of household behaviour that permits identification and estimation of concepts such as these. We model households in terms of the utility functions of its members, a bargaining or social welfare function, and a consumption technology function. We demonstrate generic non-parametric identification of the model, and hence of a version of adult equivalence scales that we call "indifference scales", as well as consumption economies of scale, the household's resource sharing rule or members' bargaining power, and other related concepts.
A profit-maximizing public good supplier endogenously determines the level of the public good and simultaneously negotiates with beneficiaries of the good one by one. A pre-negotiation commitment on ...the production level of the public good by the supplier enhances the internalization of beneficiaries' preferences. With the commitment, the supplier produces the public good at an efficient level in equilibrium if and only if its bargaining power is sufficiently weak. In addition, the public good is produced excessively as a result of the commitment when the supplier's bargaining power is sufficiently strong.
•A profit-maximizing public good supplier negotiates with beneficiaries of the good.•The supplier commits the production level of the public good prior to negotiations.•The commitment is a useful device for supplying a large amount of the public good.•A weak supplier can provide the public good efficiently with this commitment.•The supplier credibly commits the supply level of the good prior to negotiations.
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