Johannes Münster, University of Cologne

"Sequencing Bilateral Negotiations with Externalities”

Abstract

In bilateral negotiations between a principal and two agents, we show that the agents’ bargaining strengths are crucial for the determination of the bargaining sequence and the efficiency of decisions. In a general framework with externalities between agents, we find that the surplus is highest if the principal negotiates with the stronger agent first, regardless of externalities being positive or negative. The principal chooses the efficient sequence with negative externalities, but often prefers the inefficient sequence with positive externalities. We show that our results extend to a general number of agents and provide conditions for simultaneous negotiations to be optimal.

Joint with Markus Reisinger

Read full paper "equencing Bilateral Negotiations with Externalities"

Contact person: Johan Lagerlöf