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Bargaining foundation for ratio equilibrium in public good economies

Author

Listed:
  • Anne van den Nouweland

    (University of Oregon [Eugene])

  • Agnieszka Rusinowska

    (CNRS - Centre National de la Recherche Scientifique, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We provide a bargaining foundation for the concept of ratio equilibrium in public‐good economies. We define a bargaining game of alternating offers, in which players bargain to determine their cost shares of public‐good production and a level of public good. We study the stationary subgame perfect equilibrium (SSPE) without delay of the bargaining game. We demonstrate that when the players are perfectly patient, they are indifferent between the equilibrium offers of all players. We also show that every SSPE without delay in which the ratios offered by all players are the same leads to a ratio equilibrium. In addition, we demonstrate that all equilibrium ratios are offered by the players at some SSPE without delay. We use these results to discuss the case when the assumption of perfectly patient players is relaxed and the cost of delay vanishes.

Suggested Citation

  • Anne van den Nouweland & Agnieszka Rusinowska, 2020. "Bargaining foundation for ratio equilibrium in public good economies," PSE-Ecole d'économie de Paris (Postprint) hal-02195948, HAL.
    • Handle: RePEc:hal:pseptp:hal-02195948
    DOI: 10.1111/jpet.12367
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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