Bargaining Theory

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Book Review of “Bargaining Theory with Applications” (Muthoo, 1999)

Book Review of “Bargaining Theory with Applications” (Muthoo, 1999)

Abhinay Muthoo skillfully synthesizes the literature on non-cooperative bargaining theory that was initiated by Rubinstein's (1982) seminal analysis of the alternating-offers bargaining game and relates it to the well-known Nash bargaining solution. The book also contains new results, in particular regarding the relative impacts of several forces that influence the bargaining outcome. Moreover, Muthoo presents many interesting applications of the theory, including issues such as optimal asset ownership, bribery and the control of crime, corruption in tax collection, and sovereign debt negotiations.
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Essays on bargaining theory and welfare when preferences are time inconsistent

Essays on bargaining theory and welfare when preferences are time inconsistent

The aforementioned most popular model of self-control, (β, δ) -discounting, generates dy- namic inconsistency through time preferences in a minimal way: the cost of delaying a future reward further are governed by parameter δ as in exponential discounting, whereas delaying immediate gratication involves additional impatience, captured through a second parameter β . While one focus of applied work has been on rm behaviour in view of such time-inconsistent consumers, analyses of strategic interaction by several time-inconsistent agents are rare. The core model of strategic bargaining theory developed by Ingolf Ståhl and Ariel Rubinstein pro- vides, however, a setting in which time preferences matter: two parties jointly decide over how and when to divide a given economic surplus. Given the economic importance of bargaining in determining the terms of decentralised economic exchange and its prevalence in applied work ((re-) negotiation of contracts such as wage bargaining, household decision making, etc.), it appears especially important for further work with (β, δ) -discounting to have results about the outcome of bargaining when the parties have such time preferences.
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Asymmetric FDI and Tax-Treaty Bargaining: Theory and Evidence

Asymmetric FDI and Tax-Treaty Bargaining: Theory and Evidence

Tables 1 through 3 present the baseline estimation results using each of the three proxies for home bargaining power. Each table contains three estimation specifications using the BEA’s reported affiliate sales. The first column is OLS using White’s (1980) corrected standard errors. Since there are four tax rates (and four observations) for each country pair, it may be necessary to control for country clusters. Column two lists the results after performing this correction as described by Rodgers (1993). Finally, since no withholding taxes are below zero, the last column uses the Tobit estimation procedure for a dependent variable restricted to non-negative values. In addition to the reported independent variables, each of these regressions includes a constant as well as dummy variables for the parental dividend, unrelated dividend, and royalty tax. The results for these are omitted for space but are available upon request.
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Asymmetric FDI and Tax-Treaty Bargaining: Theory and Evidence

Asymmetric FDI and Tax-Treaty Bargaining: Theory and Evidence

In the theory, we make great use of the Hartman/Sinn result that overseas affiliate sales are unresponsive to the withholding taxes. This assumption need not hold in the data and we therefore use a Hausman test for endogeneity. While gravity models such as Brainard (1997) have been popular specifications for affiliate sales, they were developed more in response to the data than to the theory of the multinational enterprise (MNE). Instead we develop our instruments using recent work by Carr, Markusen, and Maskus (2001) and Markusen and Maskus (2001), both of whom establish empirical specifications of FDI activity that are arguably more grounded in the formal theories of multinational firms. As noted by Blonigen, Davies, and Head (2002) there is a misspecification in this framework regarding skill variables and we therefore use their alternative absolute-value specification. Carr, Markusen and Maskus use their empirical model to examine affiliate sales of U.S. firms in other
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Virtual bargaining : a theory of social decision making

Virtual bargaining : a theory of social decision making

A full evaluation of the virtual bargaining theory would, of course, require a much broader review of the experimental litera- ture on games, and this would go far beyond the scope of this paper. We note, though, that the scope of the present account is quite broad. Consider, for example, the Ultimatum Game. In one version, Player 1 announces a ‘split’ of, say, $100; Player 2 announces a ‘minimum’ sum to which they will agree. If Player 1’s split is less than Player 2’s minimum, neither player gets any- thing. Otherwise, the players receive the split as suggested by Player 1. Under fairly natural symmetry assumptions, the best bargain ( judged by Nash bargaining) will be a 50–50 split; and virtual bargaining then suggests that this bargain will be implicitly ‘agreed’ by the players. Indeed, the 50–50 split is the modal outcome in many experiments. This provides an alterna- tive, or perhaps complement, to standard economic accounts based on fairness [34]. A natural test between the approaches would be a version of the ultimatum game with three players: Player 1 suggests a split between the three players; Player 2 specifies a minimum payment for both Player 2 and Player 3; Player 3 is a bystander. An account based purely on fairness would presumably require even splits between the three players; a virtual bargaining account might predict a greater share demanded by, and given to, Player 2 rather than Player 3 (data from Gu¨th & Van Damme [35] suggests that fairness may play only a small role).
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Bargaining and the MISO Interference Channel

Bargaining and the MISO Interference Channel

We examine the MISO interference channel under cooperative bargaining theory. Bargaining approaches such as the Nash and Kalai-Smorodinsky solutions have previously been used in wireless networks to strike a balance between max-sum efficiency and max-min equity in users’ rates. However, cooperative bargaining for the MISO interference channel has only been studied extensively for the two-user case. We present an algorithm that finds the optimal Kalai-Smorodinsky beamformers for an arbitrary number of users. We also consider joint scheduling and beamformer selection, using gradient ascent to find a stationary point of the Kalai-Smorodinsky objective function. When interference is strong, the flexibility allowed by scheduling compensates for the performance loss due to local optimization. Finally, we explore the benefits of power control, showing that power control provides nontrivial throughput gains when the number of transmitter/receiver pairs is greater than the number of transmit antennas. Copyright © 2009 M. Nokleby and A. L. Swindlehurst. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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Bargaining Power of a Coalition in Parallel Bargaining

Bargaining Power of a Coalition in Parallel Bargaining

We now consider the solution for the case where the cable operators can write a binding con- tract when they integrate. The contract between the members of a coalition specifies how they would split the total payoffs in two possible states of nature, one in which bargaining with an out- sider, in our example a broadcaster, ends in an agreement and another in which the bargaining breaks down. The contract is written by the following process: A possible contingent payoff the coalition may receive as the result of bargaining with the outsider is put on the table as the pie to be split between the two members of the coalition. When they bargain over this contingent pie, their respective breakdown points are taken to be the payoffs they expect to receive when they do not join the coalition. This bargaining is repeated for each possible contingent pie. 13
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Negotiated Justice and the Goals of International Criminal Tribunal

Negotiated Justice and the Goals of International Criminal Tribunal

In Plavsiü, it was argued that the use of plea-bargaining could be advantageous for the victims insofar as it relieves them from the ordeal of giving testimony. 74 Hence, a second traumatization through proceedings could be prevented 75 and the risks resulting from testifying, such as retaliation, would be avoided. A further benefit of plea-bargaining from the victim’’s perspective can be seen in the potential to obtain judgments within a shorter period of time as compared to the time necessary to conduct a full-blown trial on the merits. 76 The time saved, in turn, would allow the investigation and prosecution of more cases, and thus more victims would have their suffering officially recognized and acknowledged by international tribunals. Finally, it could be argued that victims are, first and foremost, interested in a conviction. So, while the severity of the sentence and the legal qualification of the crime are secondary concerns and plea- bargaining is a means to secure a conviction, its use would nevertheless ensure the satisfaction of at least one of the victim’’s interests.
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Overcoming resistance against managed care – insights from a bargaining model

Overcoming resistance against managed care – insights from a bargaining model

The remainder of this text is structured as follows. The “Institutional background” section contains a descrip- tion of the institutions governing the provision of health care in three insurance-based countries, Germany, the Netherlands, and Switzerland. These three countries allow a degree of consumer choice in health care, which how- ever is hampered by cartelization of health insurers and service providers. In the “Methods” section a bargaining model is developed that first involves the SHI association and a MCO in a bivariate setting, representing the status quo. The reform proposal then introduces a representa- tive insured (RI) as a third player. In the “Results” section several solutions of the game based on specific param- eter constellations are studied. A generalization of the results to the Netherlands and Switzerland is provided in the “Discussion” section. The “Conclusion” section sum- marizes the paper. A list of main symbols (in order of appearance) is provided in Appendix A. Technical details are discussed in Appendices B to D.
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IN THE MATTER OF THE ARBITRATION BETWEEN (Reprinted with the permission of the parties.)

IN THE MATTER OF THE ARBITRATION BETWEEN (Reprinted with the permission of the parties.)

The union made a number of arguments that questioned the employer’s good faith in contracting out the work in question. The union characterizes the employer’s decision as unreasonable and not based in fact. (E3, U5) The union contends that the employer failed to engage and bargain with the union to discuss the project in detail. The union argues that the employees had cost information that the employer did not seriously consider and that cost information showed that the project could be performed in house for less than $35,000. The union also contends that the employer had the ability under the Agreement to negotiate higher wages for the employees in the bargaining unit, thus making it easier to fill the vacant positions and therefore to have staff available to perform this work. The union also argues that electricians in another bargaining unit were short of work and could have worked on this project without incurring overtime.
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Has the empire struck back? ‘new paradigm’ globalisation or return to classical imperialism?

Has the empire struck back? ‘new paradigm’ globalisation or return to classical imperialism?

It is a dogma of most writings on Marx that, because the profit rate in use-value terms necessarily rises with technical progress, this law cannot hold. This dogma ignores the fact, well-known to Keynesians, that the profit rate varies according to the unit of account. The ‘errors’ which the literature attributes to Marx’s law arise because in the standard, equilibrium, framework, value is incorrectly accounted for and is treated as being destroyed without being consumed; all rates of profit are collapsed onto a single rate, the use-value or ‘material’ profit rate. If, however, we interpret Marx’s value concept without presupposing equilibrium – and the evidence that this was Marx’s own idea is very substantial – then his own theory of the tendency of the rate of profit to fall is logically faultless.
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Effectiveness of Public Sector Trade Unions: A Case of Public Service Association of Zimbabwe

Effectiveness of Public Sector Trade Unions: A Case of Public Service Association of Zimbabwe

Six selected union officials were interviewed about the general performance of the Public Service Association and how members perceived its effectiveness. There was a general consensus amongst officials who noted that the PSA has not been performing well and that there was persistent membership decline. There were three key factors that were identified as major causes of PSA’s ineffectiveness, namely, (a) lack of a social contract with the employer (government), (b) lack of independent collective bargaining structure and, (c) the need for labour law reform given that the Public Service Act, which governs the civil servants does not provide for collective bargaining but mere consultations and that it did not recognize the right to strike.
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The Theory of Bargaining: A Selective Survey with Particular Reference to Union Employer Negotiations and the Occurence of Strikes

The Theory of Bargaining: A Selective Survey with Particular Reference to Union Employer Negotiations and the Occurence of Strikes

Basic to the game theoretic approach is the assumption that each bargainer possesses a yon Neumann-Morgenstern utility function.2 Given these utility functions it is usual to treat the b[r]

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Syndication and Bargaining With a Monopolist

Syndication and Bargaining With a Monopolist

The first essay develops a model of monopolistic economies in which total profit is determined by the set of traders that cooperate with the monopolist. The traders each bargain bilaterally with the monopolist for their profits and each bargaining outcome is determined by some bargaining solution. For any set of continuous bargaining solutions, there exists a general bargaining equilibrium, which is a profit distribution that is the fixed point of a system of bilateral bargaining outcome functions.

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Vol 9, No 1 (2017)

Vol 9, No 1 (2017)

Abstract: Recently, there has been a growing trend toward apply- ing game theory (GT) to various engineering fields in order to solve optimization problems with different competing entities/contribu- tors/players. Researches in the fourth generation (4G) wireless net- work field also exploited this advanced theory to overcome long- term evolution (LTE) challenges such as resource allocation, which is one of the most important research topics. In fact, an efficient de- sign of resource allocation schemes is the key to higher performance. However, the standard does not specify the optimization approach to execute the radio resource management and therefore it was left open for studies. This paper presents a survey of the existing game theory based solution for 4G-LTE radio resource allocation problem and its optimization.
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Bargaining order in multilateral bargaining with imperfect compliments

Bargaining order in multilateral bargaining with imperfect compliments

Using a sequential model of multilateral bargaining involving one buyer and two sellers, who are selling objects which are imperfect compliments for the buyer, we analyse buyer’s preferred bargaining order i.e. whether the buyer prefers to buy higher valuation object first or second. For a narrow range of parameters, where players are patient enough and objects exhibit high degree of complimentarity, multiple equilibria exist such that both the bargaining orders are preferred. For rest of the range, which is relatively much larger, buyer prefers to buy higher valuation object first.
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Debt renegotiation and entrepreneurial optimism

Debt renegotiation and entrepreneurial optimism

Quite intuitively, when the optimism level is between the two threshold points designed previously ( ), that is for an intermediate level of optimism, the entrepreneur has an interest in bargaining and the bank’s premature repayment amount is contingent on the entrepreneur’s bargaining power. However, inside this bracket we have distinguished two different bargaining behaviors on behalf of the entrepreneur. The distinction comes essentially from the level of concessions provided by the optimistic supplier and indirectly from the necessity of the entrepreneur to provide his own funds. Case (ii) of Lemma 2 designs the situation where the entrepreneur hopes not to make concessions at all. If he chooses the bargaining option he then offers to the bank only the additional funds he has anticipated to obtain from the supplier. The case (iii) concerns the situation where the entrepreneur knows that he has to bring in some of his own funds and his goal is to provide the minimum possible to the bank. In this case his bargaining incitation is stronger so the bank’s premature repayment amount is lower. This means that in the first case the bank profits from the entrepreneurs’ indifference concerning the concessions the supplier would have to make. The level of optimism allowing her to do this will therefore correspond to the following equality: . Note this level of optimism, with . We can then say that even if the entrepreneur bargains in
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Aspirational Bargaining

Aspirational Bargaining

An AE specifies exogenously-given aspiration levels for the players — the initial state of a Markov process. Once Mr. 1 offers x, Mr. 2’s aspiration value jumps to this new level x. Afterwards, the concession that is offered may yet be rejected. (See Figure 1.) This leads to a tractable Markov and martingale stochastic process on the space of possible pairs of discounted aspiration levels (Theorem 4). We can then conclude that bargaining almost surely ends in finite time; we also use this process to provide a simple lower bound on the duration of bargaining based upon observed alternating offers (Corollaries 3–4). Contrast with Temporal Monopoly. Temporal monopoly in no way precludes en- dogenous timing — as Perry and Reny (1993), Sakovics (1993), and Stahl (1993) have clearly demonstrated. They posit continuous time bargaining games where players have tiny ‘waiting’ and ‘reaction’ times after offers. This temporal monopoly setting yields very small monopoly rents, and an accordingly small proposer advantage. Consequently, the normative predictions of our model do not obtain — wars of attrition and strict con- cessions. Since their results intuitively obtain for random but boundedly positive mean waiting times after offers, at first blush one might presume that our AE are merely special cases. But our timing is truly unrestricted — and to the player with an aspiration level approaching its highest level, offers must be tendered arbitrarily quickly (Theorem 3).
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Bargaining structure and management control of industrial relations

Bargaining structure and management control of industrial relations

Background Characteristics Dimensions of Bargaining Structure Substantive and Procedural Issues Collective Bargaining Characteristics Situational Determinants Managerial Control Systems [r]

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Negotiating with the Public: Montana's Public Employee Collective Bargaining Act

Negotiating with the Public: Montana's Public Employee Collective Bargaining Act

In recognizing an exclusive employee bargaining organization, the public employer should take care to define the employees covered by the bargaining unit, specifying [r]

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