Advances in negotiation theory : bargaining, coalitions, and fairness

Bargaining is ubiquitous in real life. It is a major dimension of political and business activities. It appears at the international level, when governments negotiate on matters ranging from economic issues (such as the removal of trade barriers), to global security (such as fighting against terrorism) to environmental and related issues (such as climate change control). What factors determinethe outcomes of such negotiations? What strategies can help reach an agreement? How should the parties involved divide the gains from cooperation? With whom will one make alliances? The authors address these questions by focusing on a noncooperative approach to negotiations, which is particularly relevant for the study of international negotiations. By reviewing noncooperative bargaining theory, noncooperative coalition theory, and the theory of fair division, they try to identify the connections among these different facets of the same problem in an attempt to facilitate progress toward a unified framework.Economic Theory&Research,Social Protections&Assistance,Environmental Economics&Policies,Scientific Research&Science Parks,Science Education

Power and welfare in bargaining for coalition structure formation

We investigate a noncooperative bargaining game for partitioning n agents into non-overlapping coalitions. The game has n time periods during which the players are called according to an exogenous agenda to propose offers. With probability δ, the game ends during any time period t< n. If it does, the first t players on the agenda get a chance to propose but the others do not. Thus, δ is a measure of the degree of democracy within the game (ranging from democracy for δ= 0 , through increasing levels of authoritarianism as δ approaches 1, to dictatorship for δ= 1). We determine the subgame perfect equilibrium (SPE) and study how a player’s position on the agenda affects his bargaining power. We analyze the relation between the distribution of power of individual players, the level of democracy, and the welfare efficiency of the game. We find that purely democratic games are welfare inefficient and that introducing a degree of authoritarianism into the game makes the distribution of power more equitable and also maximizes welfare. These results remain invariant under two types of player preferences: one where each player’s preference is a total order on the space of possible coalition structures and the other where each player either likes or dislikes a coalition structure. Finally, we show that the SPE partition may or may not be core stable

Agenda Control in Coalition Formation

Theoretical models of government formation in political science usually assume that the head of state is non-strategic. In this paper, we analyze the power of an agenda setter who chooses the order in which players are recognized to form coalitions in simple games. We characterize those sets of players which can be imposed in the equilibrium coalition and show that the only decisive structures where the agenda setter can impose the presence of any minimal winning coalition are apex games, where a large player forms a winning coalition with any of the small players.Agenda Control; Cabinet Formation; Simple Games

Cooperation, Stability and Self-Enforcement in International Environmental Agreements: A Conceptual Discussion

In essence, any international environmental agreement (IEA) implies cooperation of a form or another. The paper seeks for logical foundations of this. It first deals with how the need for cooperation derives from the public good aspect of the externalities involved, as well as with where the source of cooperation lies in cooperative game theory. In either case, the quest for efficiency is claimed to be at the root of cooperation. Next, cooperation is considered from the point of view of stability. After recalling the two competing concepts of stability in use in the IEA literature, new insights on the nature of the gamma core in general are given as well as of the Chander-Tulkens solution within the gamma core. Free riding is also evaluated in relation with the alternative forms of stability under scrutiny. Finally, it is asked whether with the often mentioned virtue of “self enforcement” any conceptual gain is achieved, different from what is meant by efficiency and stability. A skeptical answer is offered, as a reply to Barrett’s (2003) attempt at giving the notion a specific content.International Environmental Agreements, Cooperation, Stability, Self-enforcement

Game theory

game theory

Bargaining for coalition structure formation

Many multiagent settings require a collection of agents to partition themselves into coalitions. In such cases, the agents may have conflicting preferences over the possible coalition structures that may form. We investigate a noncooperative bargaining game to allow the agents to resolve such conflicts and partition themselves into non-overlapping coalitions. The game has a finite horizon and is played over discrete time periods. The bargaining agenda is de- fined exogenously. An important element of the game is a parameter 0 ≤ δ ≤ 1 that represents the probability that bargaining ends in a given round. Thus, δ is a measure of the degree of democracy (ranging from democracy for δ = 0, through increasing levels of authoritarianism as δ approaches 1, to dictatorship for δ = 1). For this game, we focus on the question of how a player’s position on the agenda affects his power. We also analyse the relation between the distribution of the power of individual players, the level of democracy, and the welfare efficiency of the game. Surprisingly, we find that purely democratic games are welfare inefficient due to an uneven distribution of power among the individual players. Interestingly, introducing a degree of authoritarianism into the game makes the distribution of power more equitable and maximizes welfare

Coalition formation and strategic permit trade under the Kyoto Protocol

This paper discusses coalition formation with side payments in markets for transferable property rights where strategic agents prevail on both sides of the market. Our concern is emissions permit trading under the Kyoto Protocol. While a seller cartel is not profitable, our analysis indicates that coalitions between sellers and buyers pay off. Three stable cartels are found. None involve all agents, yet they all induce overall e¢ ciency. To support a stable coalition, the EU, Japan and Canada may pay together between 0 and 13 billion US dollars per year to Russia. The permit price and society-wide emission reductions are nil.Emissions trading; Kyoto Protocol; cartel formation; merger profitability.

Allocation Rules and the Stability of Mass Tort Class Actions

This paper studies the effects of allocation rules on the stability of mass tort class actions. I analyze a two-stage model in which a defendant faces multiple plaintiffs with heterogeneous damage claims. In stage 1, the plaintiffs play a noncooperative coalition formation game. In stage 2, the class action and any individual actions by opt-out plaintiffs are litigated or settled. I examine how the method for allocating the class recovery interacts with other factors---the shape of the damage claims distribution, the scale benefits of the class action, and the plaintiffs\u27 probability of prevailing at trial and bargaining power in settlement negotiations---to determine the asymptotic stability of the global class. My results suggest criteria to attorneys and courts for structuring and approving efficient allocations plans in mass tort class actions and for evaluating the requirements for class certification in mass tort cases