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Hanging Together or Being Hung Separately: The Strategic Power of Coalitions where Bargaining Occurs with Incomplete Information

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  • Kai A. Konrad
  • Thomas R. Cusack

Abstract

What is the strategic role of membership in an intergovernmental group with unanimity requirements if the group negotiates with an external player in a setting with incomplete information? Being in such a group has a strategic effect compared to negotiating as a stand-alone player and reduces the demands of the outside player: being in a group lends additional bargaining power. Negotiating as a group may also cause more inefficiencies due to bargaining failure, and this may harm also the intergovernmental group. We uncover the role of preference alignment and preference independence between members of the coalition group for equilibrium payoffs and welfare effects. In this analysis we also distinguishing between coalition groups with and without side payments. Overall, coalition groups tend to perform well for the members of the coalition group in comparison to fully decentralized negotiations, particularly if the objectives of the members of the coalition group are not always perfectly aligned.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4071.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4071

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Keywords: bargaining; incomplete information; coalitions; groups; strategic bargaining power;

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  1. Paola Manzini & Marco Mariotti, 2009. "Alliances and negotiations: an incomplete information example," Review of Economic Design, Springer, Springer, vol. 13(3), pages 195-203, September.
  2. Hulya Eraslan & Philip Bond, 2007. "Strategic Voting over Strategic Proposals," 2007 Meeting Papers, Society for Economic Dynamics 167, Society for Economic Dynamics.
  3. Paola MAnzini & Marco Mariotti, 2000. "Alliances and Negotiations," Game Theory and Information, EconWPA 0004007, EconWPA.
  4. R. Harrison Wagner, 2004. "Bargaining, War, and Alliances," Conflict Management and Peace Science, Peace Science Society (International), Peace Science Society (International), vol. 21(3), pages 215-231, July.
  5. Debraj Ray & Rajiv Vohra, 2001. "Coalitional Power and Public Goods," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 109(6), pages 1355-1384, December.
  6. Jupille, Joseph, 1999. "The European Union and International Outcomes," International Organization, Cambridge University Press, Cambridge University Press, vol. 53(02), pages 409-425, March.
  7. David Stasavage, 2002. "Credible Commitment in Early Modern Europe: North and Weingast Revisited," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 18(1), pages 155-186, April.
  8. John C. Harsanyi & Reinhard Selten, 1972. "A Generalized Nash Solution for Two-Person Bargaining Games with Incomplete Information," Management Science, INFORMS, INFORMS, vol. 18(5-Part-2), pages 80-106, January.
  9. Kai Konrad, 2012. "Information alliances in contests with budget limits," Public Choice, Springer, Springer, vol. 151(3), pages 679-693, June.
  10. Fritz W. Scharpf, 2006. "The Joint-Decision Trap Revisited," Journal of Common Market Studies, Wiley Blackwell, Wiley Blackwell, vol. 44, pages 845-864, November.
  11. Meunier, Sophie, 2000. "What Single Voice? European Institutions and EU–U.S. Trade Negotiations," International Organization, Cambridge University Press, Cambridge University Press, vol. 54(01), pages 103-135, December.
  12. Konishi, Hideo & Ray, Debraj, 2003. "Coalition formation as a dynamic process," Journal of Economic Theory, Elsevier, Elsevier, vol. 110(1), pages 1-41, May.
  13. Leeds, Brett Ashley, 2003. "Alliance Reliability in Times of War: Explaining State Decisions to Violate Treaties," International Organization, Cambridge University Press, Cambridge University Press, vol. 57(04), pages 801-827, September.
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