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Bargaining under monotonicity constraints

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  • P. Jean-Jacques Herings

    () (Maastricht University)

  • A. Predtetchinski

    () (Maastricht University)

Abstract

Abstract We study unanimity bargaining on the division of a surplus in the presence of monotonicity constraints. The monotonicity constraints specify a complete order on the players, which has to be respected by the shares in the surplus the players obtain in any bargaining outcome. A player higher in the order should not receive a lower share of the surplus. We analyze the resulting subgame perfect equilibria in stationary strategies and show that they are characterized by the simpler notion of bargaining equilibrium. Bargaining equilibria are shown to be unique and to have the property that players ranked strictly higher obtain strictly higher shares in the surplus. The key question is whether the bargaining advantage of a higher-ranked player persists when the probability of breakdown of bargaining tends to zero. We argue that such is not the case by showing that bargaining equilibria have a unique limit equal to an equal division of the surplus. It then follows that the limit also coincides with the Nash bargaining solution for this problem.

Suggested Citation

  • P. Jean-Jacques Herings & A. Predtetchinski, 2016. "Bargaining under monotonicity constraints," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(1), pages 221-243, June.
  • Handle: RePEc:spr:joecth:v:62:y:2016:i:1:d:10.1007_s00199-015-0886-7
    DOI: 10.1007/s00199-015-0886-7
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    References listed on IDEAS

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    More about this item

    Keywords

    Non-cooperative bargaining; Monotonicity constraints; Subgame perfect equilibrium; Nash bargaining solution;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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