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Investments, positive externalities and majority bargaining

Daniel Cardona and Antoni Rubí-Barceló ()

No 85, DEA Working Papers from Universitat de les Illes Balears, Departament d'Economía Aplicada

Abstract: This paper analyzes the welfare implications of requiring either unanimity or simple majority in negotiations to distribute a budget among agents who previously can invest to generate positive consumption externalities to others. The present paper studies this setting with simple-majority bargaining, complementing Cardona and Rubí-Barceló (2014), that consider the unanimity case. It is shown that reducing the majority requirement reduces the profitability of investments and, as a consequence, alleviates over-investment, which is predominant under unanimous bargaining. Nevertheless, simple majority reduces the aggregate surplus attained at the bargaining stage. Therefore, the relative performance of the bargaining rules is uncertain. We show how it evolves with respect to the size of consumption externalities.

Keywords: Investments; multilateral bargaining; efficiency; externalities (search for similar items in EconPapers)
JEL-codes: C78 D62 D72 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-cdm, nep-dcm, nep-gth and nep-pol
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Journal Article: Investments, Positive Externalities, and Majority Bargaining (2019) Downloads
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