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Seoul Journal of Economics - Vol. 22 , No. 2
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Seoul Journal of Economics - Vol. 22, No. 2, pp. 245-262
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 31 May 2009
Received 14 Jan 2009 Revised 24 Mar 2009

Group Bargaining with Representation
Suchan Chae
Visiting Professor, Department of Mathematical Sciences, Seoul National University, Seoul 151-746, Korea, Tel: +82-2-880-6530 (chae@rice.edu)

JEL Classification: C71, C72, C78

Abstract

We study a strategic bargaining model where two groups of individuals first choose their representatives, who then bargain with each other using a standard alternating-offer protocol, and then the shares of the members of a group are determined by a similar n-person bargaining process within the group. We show that there exists a unique perfect equilibrium outcome of this three-stage game when the breakdown probabilities of both the inter-group bargaining and intra-group bargaining are small. In equilibrium, each group selects as its representative an individual who has the greatest marginal gain from increasing the group’s share.

Keywords: Group bargaining, Nash bargaining solution, Representation, Delegation
References
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