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Some Unpleasant Bargaining Arithmetic?

Author

Listed:
  • Hülya Eraslan

    () (Department of Economics, John Hopkins University)

  • Antonio Merlo

    () (Department of Economics, University of Pennsylvania)

Abstract

It is commonly believed that, since unanimity rule safeguards the rights of each individual, it protects minorities from the possibility of expropriation, thus yielding more equitable outcomes than majority rule. We show that this is not necessarily the case in bargaining environments. We study a multilateral bargaining model à la Baron and Ferejohn (1989), where players are heterogeneous with respect to the potential surplus they bring to the bargaining table. We show that unanimity rule may generate equilibrium outcomes that are more unequal (or less equitable) than under majority rule. In fact, as players become perfectly patient, we show that the more inclusive the voting rule, the less equitable the equilibrium allocations.

Suggested Citation

  • Hülya Eraslan & Antonio Merlo, 2014. "Some Unpleasant Bargaining Arithmetic?," PIER Working Paper Archive 14-003, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  • Handle: RePEc:pen:papers:14-003
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    References listed on IDEAS

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    More about this item

    Keywords

    Multilateral bargaining; voting rules; inequality;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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