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Hanging Together or Being Hung Separately: The Strategic Power of Coalitions where Bargaining Occurs with Incomplete Information

  • Konrad, Kai A.
  • Cusack, Thomas R.

What is the strategic role of membership in an intergovernmental group with unanimity requirements if the group negotiates with an external player in a setting with incomplete information? Being in such a group has a strategic effect compared to negotiating as a standalone player and reduces the demands of the outside player: being in a group lends additional bargaining power. Negotiating as a group may also cause more inefficiencies due to bargaining failure, and this may harm also the intergovernmental group. We uncover the role of preference alignment and preference independence between members of the coalition group for equilibrium payoffs and welfare effects. In this analysis we also distinguishing between coalition groups with and without side payments. Overall, coalition groups tend to perform well for the members of the coalition group in comparison to fully decentralized negotiations, particularly if the objectives of the members of the coalition group are not always perfectly aligned.

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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79967.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:79967
Contact details of provider: Web page: http://www.socialpolitik.org/
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  1. Philip Bond & H�lya Eraslan, 2010. "Strategic Voting over Strategic Proposals," Review of Economic Studies, Oxford University Press, vol. 77(2), pages 459-490.
  2. Fritz W. Scharpf, 2006. "The Joint-Decision Trap Revisited," Journal of Common Market Studies, Wiley Blackwell, vol. 44, pages 845-864, November.
  3. Paola Manzini & Marco Mariotti, 2009. "Alliances and negotiations: an incomplete information example," Review of Economic Design, Springer, vol. 13(3), pages 195-203, September.
  4. Paola Manzini & Marco Mariotti, 2000. "Alliances and Negotiations," Working Papers 424, Queen Mary University of London, School of Economics and Finance.
  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. Jupille, Joseph, 1999. "The European Union and International Outcomes," International Organization, Cambridge University Press, vol. 53(02), pages 409-425, March.
  7. Konrad, Kai A., 2010. "Information alliances in contests with budget limits," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2010-21, Social Science Research Center Berlin (WZB).
  8. David Stasavage, 2002. "Credible Commitment in Early Modern Europe: North and Weingast Revisited," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(1), pages 155-186, April.
  9. Konrad, Kai A., 2012. "Information alliances in contests with budget limits," Munich Reprints in Economics 22072, University of Munich, Department of Economics.
  10. John C. Harsanyi & Reinhard Selten, 1972. "A Generalized Nash Solution for Two-Person Bargaining Games with Incomplete Information," Management Science, INFORMS, vol. 18(5-Part-2), pages 80-106, January.
  11. Hideo Konishi & Debraj Ray, 2000. "Coalition Formation as a Dynamic Process," Boston College Working Papers in Economics 478, Boston College Department of Economics, revised 15 Apr 2002.
  12. R. Harrison Wagner, 2004. "Bargaining, War, and Alliances," Conflict Management and Peace Science, Peace Science Society (International), vol. 21(3), pages 215-231, July.
  13. Leeds, Brett Ashley, 2003. "Alliance Reliability in Times of War: Explaining State Decisions to Violate Treaties," International Organization, Cambridge University Press, vol. 57(04), pages 801-827, September.
  14. Meunier, Sophie, 2000. "What Single Voice? European Institutions and EU–U.S. Trade Negotiations," International Organization, Cambridge University Press, vol. 54(01), pages 103-135, December.
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