Bargaining Power in Repeated Negotiations with Outside Options
نویسنده
چکیده
For repeated ultimatum bargaining, the Folk Theorem of repeated game theory suggests that there are many equilibria, among them equilibria in which the second mover, say, the buyer, appropriates all the surplus. This paper shows that the presence of outside options in form of alternative trading partners eliminates some of these equilibria by reducing the cope for extracting surplus in repeated bargaining. The structure of optimal equilibria is characterized.
منابع مشابه
Transfer of Bargaining Power Sources in Oil Trade Games
Bargaining Power is one of the important issues in oil trade negotiations. In this paper two effective factors in bargaining power i.e. patient time to deal and outside options of each player have been considered. The necessary relations for exchange of sources in negotiation have been derived.
متن کاملA Test of Bargaining Theory in the Auto Retailing Industry∗
This paper tests predictions from bargaining theory about how private information, patience, and bargaining disutility affect the division of surplus between negotiating parties. We do so using the responses to a novel survey of 1,500 new car buyers in California that asks buyers detailed questions about their bargaining behavior, their search for information, and their individual characteristi...
متن کاملPrice indeterminacy and bargaining in a market with indivisibilities
We consider an exchange market for an indivisible, heterogeneous good where pairs of buyers and sellers bargain over prices in different transactions. A stable outcome in one negotiation cannot be uniquely determined by the outcome of other negotiations, but the result of those transactions has influence through endogenously determined outside options. We prove existence of equilibria with the ...
متن کاملErkki Koskela * - Rune Stenbacka * * PROFIT SHARING , CREDIT MARKET IMPERFECTIONS AND EQUILIBRIUM UNEMPLOYMENT
We investigate the interaction between labour and credit market imperfections for equilibrium unemployment in the presence of profit sharing. Our analysis highlights the critical role of the outside option available of employees for the evaluation of the employment implications of intensified credit market competition. In a partial equilibrium with exogenous outside options increased bargaining...
متن کاملBargaining Power and Enforcement in Credit Markets
In a credit market with enforcement constraints, we study the effects of a change in the outside options of a potential defaulter on the terms of the credit contract, as well as on borrower payoffs. The results crucially depend on the allocation of “bargaining power” between the borrower and the lender. We prove that there is a crucial threshold of relative weights such that if the borrower has...
متن کامل