Economics at your fingertips  

Weakening the Weak may Harm the Strong. A Bargaining Model where Opting-In is Costly

Arno Riedl

No 13, Economics Series from Institute for Advanced Studies

Abstract: The opportunity to bargain often causes costs for at least one party in many economic situations, e.g. wage negotiations, joint ventures or interfirm cooperation. This paper studies such situations. A "strong" and a "weak" player have to agree how to divide the produced surplus. The "weak" player has to bear opting in costs. We characterize the set of subgame perfect equilibria. It is shown (i) that raising the costs of the weak party may strictly lower the payoff of the strong party, (ii) that for some cost levels the only equilibrium is inefficient, (iii) that if the players are sufficiently patient the outcomes of the "zero-cost model" and the "vanishing costs" version of our model do not coincide, and (iv) that in general multiplicity of equilibria arises.

Keywords: Noncooperative; Bargaining (search for similar items in EconPapers)
JEL-codes: C78 (search for similar items in EconPapers)
Date: 1995-09
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) First version, 1995 (application/pdf)

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:

Ordering information: This working paper can be ordered from
Institute for Advanced Studies - Library, Josefstädterstr. 39, A-1080 Vienna, Austria

Access Statistics for this paper

More papers in Economics Series from Institute for Advanced Studies Josefstädterstr. 39, A-1080 Vienna, Austria. Contact information at EDIRC.
Bibliographic data for series maintained by Doris Szoncsitz ().

Page updated 2019-08-16
Handle: RePEc:ihs:ihsesp:13