Fiscal federalism and bargaining over transfers

In this paper we provide a theoretical analysis of transfer sharing in a federalist economy by means of bargaining among regions and the federal government. The federal government could decide either to negotiate simultaneously with each region (bilateral negotiation), to negotiate with all regions together at the same table (multilateral negotiation), to negotiate under the pattern bargaining, or to negotiate under a sequential bargaining. Pattern bargaining is the most preferable bargaining way on the point of view of the federal government. However, with one-sided asymmetric spillover effects the federal government attains a higher payoff under multilateral bargaining.

On efficient procedures for multi-issue negotiation

This paper studies bilateral, multi-issue negotiation between self-interested agents with deadlines. There are a number of procedures for negotiating the issues and each of these gives a different outcome. Thus, a key problem is to decide which one to use. Given this, we study the three main alternatives: the package deal, the simultaneous procedure, and the sequential procedure. First, we determine equilibria for the case where each agent is uncertain about its opponent’s deadline. We then compare the outcomes for these procedures and determine the one that is optimal (in this case, the package deal is optimal for each party). We then compare the procedures in terms of their time complexity, the uniqueness and Pareto optimality of their solutions, and their time of agreement

North-South Climate Change Negotiations:a Sequential Game with Asymmetric Information

This article determines the conditions under which theSouthern countries should act together, or separately, while negotiating with the North about climate change policy and about the conditions for future Southern engagement. The paper models the international negotiations with complete and with asymmetric information in a dynamic framework. Results show that, depending on their characteristics, the different players can obtain benefits delaying the moment of the agreement.Bargaining theory; Asymmetric information; Climate change;International cooperation.

Backward Stealing and Forward Manipulation in the WTO

Motivated by the structure of WTO negotiations, we analyze a bargaining environment in which negotiations proceed bilaterally and sequentially under the most-favored-nation (MFN) principle. We identify backward-stealing and forward-manipulation problems that arise when governments bargain under the MFN principle in a sequential fashion. We show that these problems impede governments from achieving the multilateral efficiency frontier unless further rules of negotiation are imposed. We identify the WTO nullification-or-impairment and renegotiation provisions and its reciprocity norm as rules that are capable of providing solutions to these problems. In this way, we suggest that WTO rules can facilitate the negotiation of efficient multilateral trade agreements in a world in which the addition of new and economically significant countries to the world trading system is an ongoing process.

What factors determine the number of trading partners?

The purpose of the paper is to provide a simple model explaining buyer-supplier relationships and show what factors determine the number of trading partners. We show that when the supplier is able to determine the number of trading partners, the optimal number is small if the supplier's bargaining power with them is weak, the economy of scope in the supplier's variable costs is significant, and that in its sunk investment is weak. Investment may be greater when the number of trading partners is small. The results may be consistent with the formation of Japanese buyer-supplier relations.

North-South Climate Change Negotiations: a Sequential Game with Asymmetric Information

This article determines the conditions under which the Southern countries should act together, or separately, while negotiating with the North about climate change policy and about the conditions for future Southern engagement. The paper models the international negotiations with complete and with asymmetric information in a dynamic framework. Results show that, depending on their characteristics, the different players can obtain benefits delaying the moment of the agreement.Bargaining theory, asymmetric information, climate change, international cooperation

Recent Regional Agreements: Why so many, why so much Variance in Form, why Coming so fast, and where are they Headed?

Recent years have seen a sharp growth in the number of regional agreements both concluded and under negotiation. This paper attempts to document and discuss this growth focusing on US, EU, Chinese, Indian and other agreements. The form, coverage, and content of these agreements varies considerably from case to case. The paper asks why so many, why the variation in form, and why the recent acceleration. Implications for the trading system are discussed in a final section.

How do coalitions get built - Evidence from an extensive form coalition game with renegotiation & externalities

We investigate a three-person coalition game in which one bargainer, the builder, can propose and build a coalition over two stages. In equilibrium, coalition building ends with an efficient grand coalition, while the equilibrium path is contingent on the values of the two-person coalitions and associated externality payoffs. Considering relative payoffs need not change the equilibrium path. Nevertheless, outcomes in the experiment are often inefficient. One explanation is that bargainers have difficulties anticipating the future actions of other bargainers. This problem might be mitigated by allowing bargainers to communicate prior to each stage. A test finds that communication does in fact increase efficiency, although unevenly, and at the cost of the builder. The study implies that the nature and pattern of communication among bargainers is a critical factor in efficient coalition building.coalitional bargaining, communication, game theory, experiment

Bilateral Oligopoly

In intermediate goods markets, both buyers and sellers normally have market power, and sales are based on bilaterally negotiated contracts specifying both price and quantity. In our model, pairs of buyers and sellers meet in bilateral but interdependent Rubinstein-Ståhl negotiations. The outcome has a simple characterization (a Nash equilibrium in Nash bargaining solutions) suitable for applied work. Equilibrium quantities are efficient regardless of concentration and also with few “trading links”. The law of one price does not hold. In addition to relation-specific characteristics, prices depend on both upstream and downstream concentration and on the structure of trading links. The requirements necessary for Walrasian prices are stronger than usually believed.Bilageral Oligopoly; Bargaining; Intermediate Goods; Decentralized Trade; Walrasian Outcome