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Coalition formation and bargaining power: theory and application to international negotiations on public goods

Author

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  • Alejandro Caparrós
  • Jean-Cristophe Péreau

Abstract

This paper studies the role of bargaining power in coalition formation when two groups of substantially different agents negotiate over a public good with positive or negative spillovers. Both types of agent are allowed to form coalitions before the negotiations start. The forming of coalitions does or does not increase bargaining power, depending on the type of public good and the impact on the agents not participating in the equilibrium agreements. After analyzing the general game we apply it to North-South negotiations. For a public good with positive spillovers, such as climate change abatement, southern countries increase their bargaining power by forming a coalition when a partial agreement induces larger indirect gains for northern countries not participating in the agreement than for non-participating southern countries. We obtain similar results, with the opposite sign, for the formation of a northern coalition.

Suggested Citation

  • Alejandro Caparrós & Jean-Cristophe Péreau, 2010. "Coalition formation and bargaining power: theory and application to international negotiations on public goods," Working Papers 1017, Instituto de Políticas y Bienes Públicos (IPP), CSIC.
  • Handle: RePEc:ipp:wpaper:1017
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    File URL: http://investigacion.cchs.csic.es/RePEc/ipp/wpaper/17_Caparros_pereau.pdf
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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. Michael Finus & Alejandro Caparrós (ed.), 2015. "Game Theory and International Environmental Cooperation," Books, Edward Elgar Publishing, number 15345.
    3. Carraro, Carlo & Marchiori, Carmen & Sgobbi, Alessandra, 2005. "Advances in negotiation theory : bargaining, coalitions, and fairness," Policy Research Working Paper Series 3642, The World Bank.
    4. Carraro, Carlo & Siniscalco, Domenico, 1993. "Strategies for the international protection of the environment," Journal of Public Economics, Elsevier, vol. 52(3), pages 309-328, October.
    5. Debraj Ray & Rajiv Vohra, 2001. "Coalitional Power and Public Goods," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1355-1384, December.
    6. Geoffroy de Clippel & Roberto Serrano, 2008. "Bargaining, Coalitions and Externalities: a Comment on Maskin," Working Papers 2008-16, Brown University, Department of Economics.
    7. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-894, Supplemen.
    8. Ray, Debraj & Vohra, Rajiv, 1999. "A Theory of Endogenous Coalition Structures," Games and Economic Behavior, Elsevier, vol. 26(2), pages 286-336, January.
    9. Matthew McGinty, 2007. "International environmental agreements among asymmetric nations," Oxford Economic Papers, Oxford University Press, vol. 59(1), pages 45-62, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    game theory; bargaining; coalition formation; climate change; international environmental agreements.;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other

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