One-to-Many Bargaining with Endogenous Protocol

This paper studies the bargaining between one central player and N peripheral players. In each period the central player chooses which peripheral player to bargain with, hence the bargaining protocol is endogenously determined. The peripheral players are heterogeneous in terms of their bargaining power. We characterize the set of equilibrium outcomes with two different types of contracts, namely, contingent contract and cash-offer contract. It is shown that different bargaining protocols may arise in equilibria sustaining different agreements. The central player can play off the weaker peripheral player against the stronger peripheral players. When the players become extremely patient, the central player’s equilibrium payoff can be arbitrarily close to what he can obtain in a bilateral bargaining with only the weakest peripheral player. JEL-codes: C78.