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An Alternating-Offers Model of Multilateral Negotiations

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  • Charles J. Thomas

    (Economic Science Institute & Argyros School of Business and Economics)

Abstract

I develop an infinite-horizon alternating-offers model of multilateral negotiations, a common means of exchange whose strategic complexity has hindered previous modeling efforts. Multilateral negotiations occur in numerous settings in which one party wishes to trade with one of several others, but for concreteness I consider a buyer facing multiple sellers offering potentially different amounts of surplus to be split. The basic model provides surprising insights about introducing competition to an initially bilateral setting, while straightforward extensions provide empirical predictions about how the buyer’s choice of conducting procurement via multilateral negotiations or auctions is affected by factors including the number of sellers, uncertainty when making the choice, and costs of participating in the procurement process. More generally the model provides a tractable foundation for analyzing strategic problems in settings featuring multilateral negotiations.

Suggested Citation

  • Charles J. Thomas, 2012. "An Alternating-Offers Model of Multilateral Negotiations," Working Papers 12-31, Chapman University, Economic Science Institute.
  • Handle: RePEc:chu:wpaper:12-31
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    References listed on IDEAS

    as
    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-75, September.
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    Cited by:

    1. Deck, Cary A. & Thomas, Charles J., 2020. "Using experiments to compare the predictive power of models of multilateral negotiations," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    2. Burns, Nathaniel A. & Deck, Cary A. & Thomas, Charles J., 2023. "Experimental analysis of impatience in bilateral and multilateral negotiations," Journal of Economic Psychology, Elsevier, vol. 95(C).

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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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