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Bargaining over incentive contracts

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  • Yao, Zhiyong

Abstract

The incentive contract theory assumes that the principal holds all of the bargaining power. By introducing alternating offers and strategic delay into the nonlinear pricing model, we relax this assumption and analyze an infinite-horizon contract bargaining game. We attain either the “sequential separating equilibrium” or the “simultaneous separating equilibrium”, depending on the parameter values. We prove the existence and the uniqueness of the equilibrium, and claim that multidimensionality and strategic delay can help resolve the multiple equilibria problem of bargaining theory. When the time between offers approaches zero, either quantity distortion or delay persists.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 48 (2012)
Issue (Month): 2 ()
Pages: 98-106

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Handle: RePEc:eee:mateco:v:48:y:2012:i:2:p:98-106

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Web page: http://www.elsevier.com/locate/jmateco

Related research

Keywords: Multidimensional bargaining; Incentive contracts; Strategic delay; Alternating offers;

References

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Cited by:
  1. Li Sanxi & Yao Dongmin & Xiao Hao, 2013. "Contract Bargaining with a Risk-Averse Agent," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 285-301, November.
  2. Sen, Arijit, 2000. "Multidimensional Bargaining under Asymmetric Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 425-50, May.

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