Collective Hold-Up

Santiago Oliveros, Matias Iaryczower

Research output: Contribution to journalArticle (Academic Journal)peer-review

30 Downloads (Pure)

Abstract

We consider dynamic processes of coalition formation in which a principal bar-gains 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 bar-gaining power is concentrated in the principal.
Original languageEnglish
Number of pages43
JournalTheoretical Economics
Publication statusAccepted/In press - 25 Aug 2022

Structured keywords

  • ECON Microeconomic Theory
  • Bargaining
  • Contracting Externalities
  • Political Economy
  • Vote Buying
  • Delay

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