Bargaining order and delays in multilateral bargaining with heterogeneous sellers

Shubhro Sarkar

Mathematical Social Sciences, 2016, vol. 80, issue C, 1-20

Abstract: We consider a complete-information multilateral bargaining game in which a single buyer negotiates with two heterogeneous sellers selling perfect complementary units. While bilateral negotiations take place through a sequence of offers and counteroffers, the bargaining order is exogenously given. We solve for the conditions under which (a) the buyer prefers to negotiate with the lower-valuation seller first and (b) efficient (inefficient) outcomes emerge for the two bargaining orders. We find that the buyer prefers to negotiate with the lower-valuation seller first whenever the players are relatively impatient or the sellers are sufficiently heterogeneous. We show that there exists a unique efficient outcome when the buyer negotiates first with the lower-valuation seller and the sellers are sufficiently heterogeneous; however, significant delay in reaching agreements may arise when they are not. In case the buyer bargains with the higher-valuation seller first, an inefficient outcome is shown to exist even when players are extremely impatient.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:80:y:2016:i:c:p:1-20

DOI: 10.1016/j.mathsocsci.2015.12.004

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