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Some Unpleasant Bargaining Arithmetic?

  • Hülya Eraslan


    (Department of Economics, John Hopkins University)

  • Antonio Merlo


    (Department of Economics, University of Pennsylvania)

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.

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Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 14-003.

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Length: 31 pages
Date of creation: 03 Jan 2014
Date of revision:
Handle: RePEc:pen:papers:14-003
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  1. Olivier Compte & Philippe Jehiel, 2010. "Bargaining and Majority Rules: A Collective Search Perspective," Journal of Political Economy, University of Chicago Press, vol. 118(2), pages 189-221, 04.
  2. Baron David & Kalai Ehud, 1993. "The Simplest Equilibrium of a Majority-Rule Division Game," Journal of Economic Theory, Elsevier, vol. 61(2), pages 290-301, December.
  3. Huseyin Yildirim, 2010. "Distribution of surplus in sequential bargaining with endogenous recognition," Public Choice, Springer, vol. 142(1), pages 41-57, January.
  4. Eraslan, H. & Merlo, A., 2000. "Majority Rule in a Stochastic Model of Bargaining," Working Papers 00-05, C.V. Starr Center for Applied Economics, New York University.
  5. Eraslan, Hulya, 2002. "Uniqueness of Stationary Equilibrium Payoffs in the Baron-Ferejohn Model," Journal of Economic Theory, Elsevier, vol. 103(1), pages 11-30, March.
  6. Harrington, Joseph E, Jr, 1990. " The Role of Risk Preferences in Bargaining When Acceptance of a Proposal Requires Less than Unanimous Approval," Journal of Risk and Uncertainty, Springer, vol. 3(2), pages 135-54, June.
  7. Mariagiovanna Baccara & Ronny Razin, 2007. "Bargaining Over New Ideas: The Distribution of Rents and the Stability of Innovative Firms," Journal of the European Economic Association, MIT Press, vol. 5(6), pages 1095-1129, December.
  8. Tasos Kalandrakis, 2004. "Proposal Rights and Political Power," Wallis Working Papers WP38, University of Rochester - Wallis Institute of Political Economy.
  9. Sutton, John, 1986. "Non-cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 709-24, October.
  10. Yildirim, Huseyin, 2007. "Proposal power and majority rule in multilateral bargaining with costly recognition," Journal of Economic Theory, Elsevier, vol. 136(1), pages 167-196, September.
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