Disagreement in bargaining: An empirical analysis of OPEC

Kyle Hyndman

International Journal of Industrial Organization, 2008, vol. 26, issue 3, 811-828

Abstract: We consider a stylised model in which two cartel members bargain over the aggregate-production quota in a world of asymmetric information. We show that when the two cartel members are sufficiently different, the probability of agreement depends on both the current state of demand and initial production. Specifically, the probability of agreement is much lower when demand is low (and initial production is relatively high) than when demand is high (and initial production is relatively low). We also find that, regardless of the current demand state, the more extreme is initial production, the higher is the probability of agreement. Using an event study, where we take as events OPEC production quota announcements, we demonstrate empirically that the predictions of the model are borne out.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167-7187(07)00081-1
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:26:y:2008:i:3:p:811-828

Access Statistics for this article

International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

More articles in International Journal of Industrial Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().