Ratification Requirement and Bargaining Power

Hans Haller and Steinar Holden

International Economic Review, 1997, vol. 38, issue 4, 825-51

Abstract: When a large group of people is affected by a bargaining outcome, practical reasons often require that the group be represented by an agent in the bargaining. This paper addresses the issue of how the group ensures that the agent reaches an agreement that satisfies the group. The authors show that, by adopting a super-majority ratification rule, the group may improve its bargaining position and obtain a larger share of the bargaining surplus. However, a super-majority ratification rule also involves the risk that a beneficial agreement is rejected by a minority of the group. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1997
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