Endogenous claims and collective production: an experimental study on the timing of profit-sharing negotiations and production

Andrzej Baranski

Experimental Economics, 2019, vol. 22, issue 4, No 5, 857-884

Abstract: Abstract We explore the efficiency and distributive implications of a multilateral bargaining model with endogenous production of the surplus under two different timings: ex ante and ex post bargaining. Both timings are commonly observed in business partnerships and alliance formations. The theoretical predictions confirm an intuitive economic tenet: in ex post bargaining, effort is considered sunk and opportunistic bargaining behavior will dissuade players from producing. On the other hand, ex ante bargaining entails an allocation of ownership shares that induces at least certain members to invest in the common fund because their return is guaranteed. Experiments show opposite results: ex post bargaining yields almost fully efficient outcomes while the reverse timing entails near zero efficiency. The psychological theory of inequity is useful in reconciling these divergent results.

Keywords: Multilateral bargaining; Profit sharing; Public goods; Inequity; Baron and Ferejohn (1989) (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (16)

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DOI: 10.1007/s10683-018-9591-2

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