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Intra-firm bargaining and learning in a market equilibrium

Author

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  • Drugov, Mikhail

Abstract

This paper introduces an agency relationship into a dynamic game with informational externalities. Two principals bargain with their respective agents about the production cost which is the private information of the agents and is correlated between them. We find that the agency relationship creates an incentive for simultaneous production, even if this involves an inefficient delay. As the commitment power of the principals decreases, this incentive becomes stronger. When principals compete, the effect of competition is decomposed into two parts. Inter-period competition (from past and future actions) pushes principals towards simultaneous actions, while intra-period competition (from concurrent actions) does the opposite.

Suggested Citation

  • Drugov, Mikhail, 2011. "Intra-firm bargaining and learning in a market equilibrium," UC3M Working papers. Economics we1102, Universidad Carlos III de Madrid. Departamento de Economía.
  • Handle: RePEc:cte:werepe:we1102
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    File URL: https://e-archivo.uc3m.es/bitstream/handle/10016/10439/we1102.pdf?sequence=1
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    References listed on IDEAS

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    1. Robert Gary‐Bobo & Yossi Spiegel, 2006. "Optimal state‐contingent regulation under limited liability," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 431-448, June.
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    Cited by:

    1. Drugov, Mikhail, 2014. "Bargaining with Informational Externalities in a Market Equilibrium," CEPR Discussion Papers 10021, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Bargaining;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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