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Transparency, complementarity and holdout

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  • Roy Chowdhury, Prabal
  • Sengupta, Kunal

Abstract

This paper 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. We address this problem in a very general setup with a bargaining protocol that is symmetric and allows for both publicly observable, as well as secret offers, and a technology that allows for variable degrees of complementarity. The central insight is that the transparency of the bargaining protocol, formalized by whether offers are publicly observable or secret, as well as the extent of complementarity, play a critical role in generating efficiency. Even with perfect complementarity, holdout seems to be largely resolved whenever the bargaining protocol is public (but not if it is secret). Further, irrespective of the bargaining protocol, holdout is resolved if the marginal contribution of the last seller is not too large.

Suggested Citation

  • Roy Chowdhury, Prabal & Sengupta, Kunal, 2009. "Transparency, complementarity and holdout," MPRA Paper 17606, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:17606
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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:

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

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