Bargaining Cum Voice

35 Pages Posted: 12 Apr 2010

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Research; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Hans H. Haller

Virginia Polytechnic Institute & State University - Department of Economics

Date Written: April 2010

Abstract

We propose a formal concept of the power of voice in the context of a simple model where individuals form groups and trade in competitive markets. Individuals use outside options in two different ways. Actual outside options reflect the possibility to exit or to join other existing groups. Hypothetical outside options refer to hypothetical groups that are ultimately not formed. Articulation of hypothetical outside options in the bargaining process determines the relative bargaining power of the members of a group, which constitutes an instance of the power of voice. The adopted equilibrium concept, competitive equilibrium with free group formation and bargaining cum voice, endogenizes the outside options as well as the power of voice. We establish existence of such equilibria and we explore their properties.

Keywords: articulation of outside options, bargaining, Competitive equilibria, group formation, Power of Voice

JEL Classification: D13, D5, D71

Suggested Citation

Gersbach, Hans and Haller, Hans H., Bargaining Cum Voice (April 2010). CEPR Discussion Paper No. DP7774, Available at SSRN: https://ssrn.com/abstract=1586255

Hans Gersbach (Contact Author)

ETH Zurich - CER-ETH -Center of Economic Research ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Centre for Economic Policy Research (CEPR)

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Hans H. Haller

Virginia Polytechnic Institute & State University - Department of Economics ( email )

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United States
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