Seminar: Joosung Lee - Edinburgh University
Topic: Bilateralism vs. Multilateralism: The Role of Bargaining Protocol in Networks
As part of the External Economics and Finance Seminar Series.
Abstract: We study non-cooperative bargaining, in which one center player and multiple leaf players bargain over a unit surplus: the center player can bargain with all the leaf players, but leaf players can only do with the center player. By characterizing Markov perfect equilibria, we investigate the role of bargaining protocols on equality and efficiency. Under the bilateral protocol, which requires each player to bargain only with one another at a time, the center player's payoff is lower than that of each leaf player in the unique equilibrium. Without the bilateral restriction, the center player's payoff exceeds the sum of all the other players in any equilibrium. We also argue that the bilateral restriction can improve social welfare, as strategic delays occur under the multilateral protocol.