Abstract
We study patterns of behavior in bilateral bargaining situations using a rich new data set describing back-and-forth sequential bargaining occurring in over 25 million listings from eBay’s ...Best Offer platform. We compare observed behavior to predictions from the large theoretical bargaining literature. One-third of bargaining interactions end in immediate agreement, as predicted by complete-information models. The majority of sequences play out differently, ending in disagreement or delayed agreement, which have been rationalized by incomplete information models. We find that stronger bargaining power and better outside options improve agents’ outcomes. Robust empirical findings that existing models cannot rationalize include reciprocal (and gradual) concession behavior and delayed disagreement. Another robust pattern at odds with existing theory is that players exhibit a preference for making and accepting offers that split the difference between the two most recent offers. These observations suggest that behavioral norms, which are neither incorporated nor explained by existing theories, play an important role in the success of bargaining outcomes.
We study a model of sequential bargaining in which, in each period before an agreement is reached, the proposerʼs identity is randomly determined, the proposer suggests a division of a pie of size ...one, each other agent either approves or rejects the proposal, and the proposal is implemented if the set of approving agents is a winning coalition for the proposer. The theory of the fixed point index is used to show that stationary equilibrium expected payoffs of this coalitional bargaining game are unique. This generalizes Eraslan 34 insofar as: (a) there are no restrictions on the structure of sets of winning coalitions; (b) different proposers may have different sets of winning coalitions; (c) there may be a positive probability that no proposer is selected.
After the increase in inequalities following the Great Recession, studies on wage bargaining systems have increasingly focused on wage inequality. This research examines wage inequality associated ...with collective bargaining levels in Spain, based on matched employer–employee microdata and quantile regression methods. These methods are applied across the wage distribution, following the method proposed by Firpo et al. (2011), to estimate wage premiums associated with agreement levels and to decompose the wage differentials observed at different points of the wage distribution. From the evidence obtained it can be concluded that, although the higher wages found in firm-level agreements are explained by the better observed characteristics of firms and workers covered by these collective agreements, there remains a positive wage premium. Although this premium is seen throughout the wage distribution, it favours mostly workers in the middle and upper-middle end. This slightly increases wage inequality in comparison with sectoral agreements. In contrast, workers without collective bargaining coverage generally suffer a wage penalty. This penalty is only observed on the left of the wage distribution. It becomes a significant wage premium in the upper end of the distribution, which implies a significant increase in wage inequality. In short, the evidence of this research suggests that reducing the coverage of collective bargaining could be associated with a significant increase in wage inequality. A better policy option for countries with a predominant sectoral model, such as Spain, would be to move towards an organized decentralization model. This would cause significant gains in employment as suggested by OECD (2019) and only a slight increase in wage inequality.
The small open economies in Scandinavia have for long periods had high work effort, small wage differentials, high productivity, and a generous welfare state. To understand how this might be an ...economic and political equilibrium we combine models of collective wage bargaining, creative job destruction, and welfare spending. The two-tier system of wage bargaining provides microeconomic efficiency and wage compression. Combined with a vintage approach to the process of creative destruction we show how wage compression fuels investments, enhances average productivity and increases the mean wage by allocating more of the work force to the most modern activities. Finally, we show how the political support of welfare spending is fueled by both a higher mean wage and a lower wage dispersion.
We analyze a dynamic bargaining game in which a seller and a buyer negotiate over quantity and payment to trade for a product. Both firms are impatient, and they make alternating offers until an ...agreement is reached. The buyer is privately informed about his type, which can be high or low: the high type's demand is stochastically larger than the low type's. In the dynamic negotiation process, the seller can screen, whereas the buyer can signal information through their offers, and the buyer has an
endogenous
and
type-dependent
reservation profit. With rational assumptions on the seller's belief structure, we characterize the perfect Bayesian equilibrium of the bargaining game. Interestingly, we find that both quantity distortion and information rent may be avoided depending on the firms' relative patience, and the seller may reach an agreement with either the high type or the low type first, or with both simultaneously. Furthermore, we explore our model to characterize the effect of demand forecasting accuracy on firm profitability. We find that improved demand forecast benefits the buyer but hurts the seller when the buyer's forecasting accuracy is low. However, once the buyer's forecasting accuracy exceeds a threshold, both firms will benefit from further improvement of the forecast. This observation makes an interesting contrast to previous findings based on the one-shot principal-agent model, in which improvement of forecasting accuracy mostly leads to a win-lose outcome for the two firms, and the buyer has an incentive to improve his forecasting accuracy only when it is extremely low.
This paper was accepted by Yossi Aviv, operations management.
Limited Foresight Equilibrium Rampal, Jeevant
Games and economic behavior,
March 2022, 2022-03-00, Volume:
132
Journal Article
Peer reviewed
This paper models a scenario where finite perfect-information games are distorted in two ways. First, each player can have different possible levels of foresight, where foresight is a particular ...number of future stages that the player can observe/understand from each of her moves. In particular, each player's foresight is allowed to be “limited” or insufficient to observe the entire game from each move. Second, there is uncertainty about each opponent's foresight. I define the Limited Foresight Equilibrium (LFE) for this model. An LFE specifies how limited-foresight players' strategies and beliefs about opponents' foresight evolve as they move through the stages of the game. I show the existence of LFE and describe its other properties. I show that in LFE limited-foresight players follow simple heuristics for beliefs and actions. As applications, LFE is shown to rationalize experimental findings on Sequential Bargaining and the Centipede game.
Against the European trend, German statutory collective bargaining extensions (SBEs) have decreased in the last two decades, contributing to the exceptional erosion of German wage-bargaining ...coverage. This article distinguishes between two liberalization dynamics: an intrasectoral dynamic that started with the introduction of employers’ association memberships outside the scope of collective agreements, and an intersectoral dynamic. The latter is the result of an abnormal German institutional feature, the veto power of the employers’ umbrella association in the committees that have to approve SBE applications. Activation of this veto enabled employers to promote collective bargaining erosion in sectors other than their own, in order to contain cost pressures. This intersectoral liberalization dynamic has been part of Germany’s transition into an asymmetrically export-driven growth regime and could be stopped by means of political reforms.
Schelling proposed that payoff-irrelevant cues can affect the outcome of tacit bargaining games by creating focal points. Tests of this hypothesis have found that conflicts of interest between ...players inhibit focal-point reasoning. We investigate experimentally whether this effect is reduced if players have imperfect information about each other's payoffs. When players know only their own payoffs, they fail to ignore this information even though it cannot assist coordination; the effects of payoff-irrelevant cues on coordination success are small. When no exact information about payoffs is provided, payoff-irrelevant cues are more helpful, but not as much as when conflict is absent.
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