Coordination and bargaining power in contracting with externalities

Alberto Galasso

Journal of Economic Theory, 2008, vol. 143, issue 1, 558-570

Abstract: Building on Genicot and Ray [G. Genicot, D. Ray, Contracts and externalities: How things fall apart, J. Econ. Theory 131 (2006) 71-100] we develop a model of non-cooperative bargaining that combines the two main approaches in the literature of contracting with externalities: the offer game (in which the principal makes simultaneous offers to the agents) and the bidding game (in which the agents make simultaneous offers to the principal). Allowing for agent coordination, we show that the outcome of our bargaining procedure may differ remarkably from those of the offer and the bidding games. In particular, we find that bargaining can break agents' coordination and that the principal's payoff can be decreasing in his own bargaining power.

Keywords: Coordination; Bargaining; Multilateral; externalities; Multi-agent; games (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:143:y:2008:i:1:p:558-570

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