Valuations and dynamics of negotiations
Journal of Public Economic Theory, 2020, vol. 22, issue 1, 245-273
This paper analyzes three‐party negotiations in the presence of externalities. We obtain a closed‐form solution for the Markov perfect equilibrium of a multilateral non‐cooperative bargaining model, yielding an equilibrium value and dynamics of negotiations that are supported by experimental studies. Players’ values are monotonically increasing (or decreasing) in the amount of negative (or positive) externalities that they impose on others. Moreover, players’ values are continuous and piecewise linear on the worth of bilateral coalitions, and are inextricably related to their negotiation strategies: the equilibrium value is the Nash bargaining solution when no bilateral coalitions form; the Shapley value when all bilateral coalitions form; or the nucleolus, when either one bilateral coalition among “natural partners” or two bilateral coalitions including a “pivotal player” form.
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:22:y:2020:i:1:p:245-273
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Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders
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