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Multilateral bargaining with proposer selection contest

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  • Duk Gyoo Kim
  • Sang‐Hyun Kim
Abstract
This study investigates the competition to be selected as the proposer in a subsequent multilateral bargaining game experimentally. The experimental environment varies in two dimensions: reservation payoffs (homogeneous or heterogeneous) and information on the extent of each subject's investment in the competition (public or private). The proposer's share was significantly lower than what theory predicts, and with taking into account the proposer's partial rent extraction, subjects over‐invest to increase their chances of winning the right to propose. More importantly, we find that inefficiency (due to the costly competition) and inequity go hand in hand; the surplus was distributed most efficiently and most equally when subjects were informed of who had spent how much in the competition, and slightly more when the reservation payoffs were heterogeneous. The proportion of proposals being rejected was smaller in the public treatments than in the private treatments. This study contributes to the literature by identifying formal rules that are more effective in establishing efficient informal norms. Négociation multilatérale avec concours de sélection du proposant. Cet article s'intéresse à la compétition visant à sélectionner le « proposant », c'est‐à‐dire l'initiateur des propositions, dans un jeu expérimental de négociation multilatérale. L'expérience varie sous deux aspects : le caractère homogène ou hétérogène des « profits de réservation » (reservation payoffs), et le caractère public ou privé de l'information relative au niveau d'investissement de chaque sujet dans la compétition. La part du proposant s'avère bien plus faible que ce que prévoit la théorie, et si l'on considère l'extraction de rente partielle que confère ce rôle, les sujets sur‐investissent pour accroître leurs chances de remporter le droit de formuler les propositions. Nous constatons surtout qu'en raison des coûts importants engendrés par la compétition, l'inefficacité et l'iniquité sont étroitement liées. Le surplus est distribué de manière plus efficace et équitable lorsque les sujets sont informés des dépenses des autres participants pour la compétition, et encore davantage lorsque les profits de réservation sont hétérogènes. Le nombre de propositions rejetées est plus faible lorsque le caractère de l'information est public plutôt que privé. Cet article apporte une contribution à la littérature en identifiant les règles formelles les plus efficaces pour établir des normes officieuses performantes.

Suggested Citation

  • Duk Gyoo Kim & Sang‐Hyun Kim, 2022. "Multilateral bargaining with proposer selection contest," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(1), pages 38-73, February.
    • Handle: RePEc:wly:canjec:v:55:y:2022:i:1:p:38-73
    DOI: 10.1111/caje.12574
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    Cited by:

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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