Bargaining, Competition and Efficient Investment

Kalyan Chatterjee and Y. Stephen Chiu
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Kalyan Chatterjee: Department of Economics, The Pennsylvania State University, University Park, Pa. 16802, USA
Y. Stephen Chiu: School of Economics and Finance, University of Hong Kong, Hong Kong

Chapter 4 in Bargaining in the Shadow of the Market:Selected Papers on Bilateral and Multilateral Bargaining, 2013, pp 79-95 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThis paper explores the interplay between choice of investment type (specific vs. general), bargaining extensive form and endogenous outside options in the framework of incomplete contracts introduced formally in the work of Grossman, Hart and Moore. We find that the bargaining procedure chosen has significant implications for choice of investment and for the usefulness of the assignment of property rights in enhancing efficiency. Somewhat paradoxically an “auction-like” procedure might need the correct assignment of property rights for a more efficient solution while a sequential offers procedure might do as well as the best assignment of property rights.

Keywords: Bilateral Bargaining; Noncooperative Theory of Coalitional Bargaining; Political Negotiations; Multilateral Bargaining; Coalitional Bargaining; Arbitration; Dynamic Model of Negotiation (search for similar items in EconPapers)
Date: 2013
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