Collective hold-up

Matias Iaryczower, Santiago Oliveros

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

We consider dynamic processes of coalition formation in which a principal bargains sequentially with a group of agents. This problem is at the core of a variety of applications in economics, including lobbying, exclusive deals, and acquisition of complementary patents. In this context, we study how the allocation of bargaining power between principal and agents affects efficiency and welfare. We show that when the principal's willingness to pay is large relative to agents' payoffs for completion, efficiency requires concentrating bargaining power in the principal. Strengthening the bargaining position of the agents increases inefficient delay and reduces agents' welfare. This occurs in spite of the lack of informational asymmetries or discriminatory offers. When this collective action problem is severe enough, agents are better off when bargaining power is concentrated in the principal.

Original languageEnglish (US)
Pages (from-to)1063-1100
Number of pages38
JournalTheoretical Economics
Volume18
Issue number3
DOIs
StatePublished - Jul 2023

All Science Journal Classification (ASJC) codes

  • General Economics, Econometrics and Finance

Keywords

  • Bargaining
  • C78
  • D72
  • D86
  • contracting externalities
  • delay
  • political economy
  • vote buying

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