Bargaining with Externalities∗

This paper studies bargaining between a seller and multiple buyers with externalities. A full characterization of the stationary subgame perfect equilibria in generic games is presented. Equilibria exist for generic parameter values, with delay only for strong positive externalities. The outcome is efficient if externalities are not too positive. Increasing the bargaining power of the seller decreases the set of parameter values for which only efficient equilibria exist. The paper generalizes the model presented in Jehiel & Moldovanu (1995a and 1995b). Where they find delay equilibria, we find mixed equilibria, except for a region where no stationary equilibria exist. These mixed equilibria entail no delay and the equilibrium strategies converges to pure as the discount factor approaches one. We are able to show existence of stationary equilibria given a reasonable restriction on parameters. We find delay with strong positive externalities, due to a hold-up problem. All equilibria without delay have the property that agreement is with a specific buyer in the limit.