Costly Bargaining and Renegotiation

Anderlini, Luca; Felli, Leonardo

doi:10.1111/1468-0262.00196

Cited by 53 publications

(27 citation statements)

References 20 publications

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“…There are cases in which bargaining is costly (Anderlini and Felli 2001) or either g or n (or both) are wealth constrained, so that the parties may not be able to make (or commit to) the equilibrium side payment T e . To illustrate this scenario very starkly, we assume that no side payment can be made.…”

Section: Equilibrium Authoritymentioning

confidence: 99%

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Control Rights in Complex Partnerships

Francesconi

Muthoo

2011

Journal of the European Economic Association

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ABSTRACT. This paper develops a theory of the allocation of authority between two players who are in a "complex" partnership, that is, a partnership which produces impure public goods. We show that the optimal allocation depends on technological factors, the parties' valuations of the goods produced, and the degree of impurity of these goods. When the degree of impurity is large, control rights should be given to the main investor, irrespective of preference considerations. There are some situations in which this allocation is optimal even if the degree of impurity is very low as long as one party's investment is more important than the other party's. If the parties' investments are of similar importance and the degree of impurity is large, shared authority is optimal with a greater share going to the low-valuation party. If the importance of the parties' investments is similar but the degree of impurity is neither large nor small, the low-valuation party should receive sole authority. We analyze two important extensions, one in which side payments are infeasible and the other in which parties can make repeated investments. We check for robustness of our results in several dimensions, such as allowing for multiple parties or for joint authority, apply our results to interpret a number of complex partnerships, including those involving schools and child custody. JEL Classification Numbers: D02, D23, H41, L31.

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Section: Equilibrium Authoritymentioning

confidence: 99%

“…23 23 As in the bargaining theory literature, this failure may arise from either specific procedural features (Muthoo 1999) or the presence of bargaining costs (Anderlini and Felli 2001). …”

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confidence: 99%

Control Rights in Complex Partnerships

Francesconi

Muthoo

2011

Journal of the European Economic Association

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“…Similarly, the inefficient equilibria are Pareto dominated by efficient ones in models of strikes (e.g.,Fernandez and Glazer 1991) or, more generally, in bargaining models in which the bargainers can impose costs on each other between offers (e.g.,Busch andWen 1995 andMuthoo 1999). By contrast,Anderlini and Felli (2001) andMerlo and Wilson (1995) do obtain inefficient, Pareto undominated equilibria. By contrast,Anderlini and Felli (2001) andMerlo and Wilson (1995) do obtain inefficient, Pareto undominated equilibria.…”

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confidence: 96%

The Inefficient Use of Power: Costly Conflict with Complete Information

2004

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R ecent work across a wide range of issues in political economy as well as in American, comparative, and international politics tries to explain the inefficient use of power-revolutions, civil wars, high levels of public debt, international conflict, and costly policy insulation-in terms of commitment problems. This paper shows that a common mechanism is at work in a number of these diverse studies. This common mechanism provides a more general formulation of a type of commitment problem that can arise in many different substantive settings. The present analysis then formalizes this mechanism as an "inefficiency condition" that ensures that all of the equilibria of a stochastic game are inefficient. This condition has a natural substantive interpretation: Large, rapid changes in the actors' relative power (measured in terms of their minmax payoffs) may cause inefficiency.

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“…As in Burdett and Mortensen (1998) and Burdett and Coles (2003), the worker is unable to let the current and new employers compete over his services, and the poaching firm has all the bargaining power. The microfundations for these assumptions, based on the existence of some renegotiation costs, are developed in Hashimoto (1981) and Anderlini and Felli (2001).…”

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confidence: 99%

Financial Markets and Wages

Michelacci

Quadrini

2005

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We study a labor market equilibrium model in which firms sign optimal long-term contracts with workers. Firms that are financially constrained offer an increasing wage profile: They pay lower wages today in exchange of higher wages once they become unconstrained and operate at a larger scale. In equilibrium, constrained firms are on average smaller and pay lower wages. In this way the model generates a positive relation between firm size and wages. Using data from the National Longitudinal Survey of Youth (NLSY) we show that the key dynamic properties of the model are supported by the data.Claudio Michelacci CEMFI

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Costly Bargaining and Renegotiation

Cited by 53 publications

References 20 publications

Control Rights in Complex Partnerships

Control Rights in Complex Partnerships

The Inefficient Use of Power: Costly Conflict with Complete Information

Financial Markets and Wages

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