In many situations, groups bargain over a fixed surplus—for instance, in negotiations between a labor union and a firm, groups of shareholders at two firms forming a joint venture, or a group of plaintiffs engaged in arbitration against a defendant (or a group of defendants). In “Group Bargaining: A Model of International Treaty Ratification,” Economist WonSeok Yoo and his co-author consider the impact of intra-group bargaining protocols on inter-group bargaining power, as well as on intra-group inequality. They use as a model two countries bargaining over a treaty sharing finite resources and resulting in unequal gains, with winners and losers within each country.
The paper builds a model of non-cooperative bargaining that illuminates the role of intra-group protocols in determining inter-group bargaining outcomes. Dr. Yoo and his co-author find that the size of the group has no impact on the total amount the group can expect to gain in negotiations, although larger group size does increase within-group inequality. In addition, a more stringent requirement for ratification by a majority or supermajority increases the group’s expected collective gain while reducing intra-group inequality. They also find that delegation reduces the group’s expected share of the budget in inter-group bargaining. Finally, they find that delegation increases inequality in gains and that including more members in the delegated committee can reduce that inequality.
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