Working Paper: NBER ID: w29984
Authors: Matias Iaryczower; Santiago Oliveros
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 and politics, including a lobbyist seeking to pass a bill, an entrepreneur setting up a start-up, or a firm seeking the approval of corrupt bureaucrats. We show that when the principal’s willingness to pay is high, strengthening the bargaining position of the agents generates 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 prefer to give up considerable bargaining power in favor of the principal.
Keywords: Bargaining; Coalition Formation; Principal-Agent
JEL Codes: C78
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| principal's willingness to pay (M52) | agents' bargaining power (L85) |
| agents' bargaining power (L85) | delays in reaching agreements (J52) |
| delays in reaching agreements (J52) | agents' welfare (L85) |
| principal's willingness to pay (M52) | delays in reaching agreements (J52) |
| agents' bargaining power (L85) | agents' welfare (L85) |
| bargaining power allocation (C78) | outcomes (P47) |
| concentrated power structure (L22) | efficient outcomes (D61) |