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Transparency, Complementarity and Holdout

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  • Prabal Roy Chowdhury
  • Kunal Sengupta

Abstract

This article characterizes the conditions under which holdout (i.e. bargaining inefficiency) may, or may not be significant in a two-sided, one-buyer-many-seller model with complementarity. Our central result is that the severity of holdout (i.e. inefficiency) is critically dependent on three factors, (a) the transparency of the bargaining protocol, (b) the outside option of the buyer, and (c) the marginal contribution of the last seller. We find that although the accepted wisdom that holdout is severe, goes through whenever either the buyer has no outside option, or the bargaining protocol is secret, the holdout problem however is largely resolved whenever either the bargaining protocol is transparent and the buyer has a positive outside option, or if the marginal contribution of the last seller is not too large.

Suggested Citation

  • Prabal Roy Chowdhury & Kunal Sengupta, 2010. "Transparency, Complementarity and Holdout," Monash Economics Working Papers 49-10, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2010-49
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:gamebe:v:107:y:2018:i:c:p:364-379 is not listed on IDEAS
    2. Chowdhury, Prabal Roy, 2013. "Land acquisition: Political intervention, fragmentation and voice," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 63-78.
    3. Maurya, Amit Kumar, 2015. "Multilateral Bargaining with Discrete Surplus," MPRA Paper 67558, University Library of Munich, Germany.
    4. Prabal Roy Chowdhury, 2010. "Land acquisition: Political intervention, voice and fragmentation," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 10-05, Indian Statistical Institute, New Delhi, India.
    5. Maurya, Amit Kumar, 2015. "A Comment on "Multilateral Bargaining"," MPRA Paper 67463, University Library of Munich, Germany.
    6. Montez, João, 2014. "One-to-many bargaining when pairwise agreements are non-renegotiable," Journal of Economic Theory, Elsevier, vol. 152(C), pages 249-265.
    7. repec:spr:jogath:v:46:y:2017:i:3:d:10.1007_s00182-016-0556-4 is not listed on IDEAS
    8. Sarkar, Shubhro, 2016. "Bargaining order and delays in multilateral bargaining with heterogeneous sellers," Mathematical Social Sciences, Elsevier, vol. 80(C), pages 1-20.
    9. Göller, Daniel & Hewer, Michael, 2015. "Breakdown in multilateral negotiations," Journal of Economic Theory, Elsevier, vol. 157(C), pages 478-484.

    More about this item

    Keywords

    Multi-person bargaining; holdout; complementarity; efficiency; secret offers; public offers; Coase theorem; transparency.;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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