A Model of Ordered Bargaining with Applications
18 Pages Posted: 22 Oct 2008
Date Written: October 20, 2008
We present a model of ordered bargaining between one buyer and several sellers, with Nash bargaining at each stage. We first show that the model has the property that the buyer's payoff equals the expected utility of a weighted sum of independent Bernoulli random variables. We then exploit this property to uncover further properties and implications of the model using standard results from expected utility and probability theory. We derive some potential implications for merger analysis and we outline an application of the model to the allocation of pork barrel spending.
Keywords: bargaining, ordered bargaining, Nash bargaining solution
JEL Classification: C78
Suggested Citation: Suggested Citation