Social Comparisons in Ultimatum Bargaining

Experiments are used to examine the effects of social comparisons in ultimatum bargaining. We inform responders about the average offer before they decide whether to accept or reject their specific offer. This significantly increases offers and offer‐specific rejection probabilities. For comparison, we consider another change in informational conditions: telling responders the total pie is $30—ex ante it was either $15 or $30—affects offers and rejection probabilities roughly as much. Our results are consistent with people’s dislike for deviations from the norm of equity but inconsistent with fairness theories, where people dislike income disparity between themselves and their referents.     

Marriage Settlements

French couples may choose between two types of marriage settlements governing asset ownership after a divorce or inheritance: common property or separate property. A cooperative model considers the marriage contract as a means of providing for widowhood of the less endowed spouse. A second model addresses the probability of divorce and the production of a marriage good. The common property contract then becomes a means of inducing the wife to invest in the marriage good. Choice of contract, labor supply and fertility are simultaneous. Empirically we find that characteristics of the spouses such as relative age or differences in endowments influence the choice. So do the expected number of children and the wife's labor supply decision. This last decision is also shown to be influenced by the chosen settlement, while fertility is not.
JEL classification : J 12; J 4; K 12     

Average Monotonic Cooperative Games

A subclass of monotonic transferable utility (T.U.) games is studied: average monotonic games. These games are totally balanced. We prove that the core coincides with both the bargaining set à la Davis and Maschler and the bargaining set à la Mas-Colell. To obtain this result a technique based on reduced games is used. Journal of Economic Literature Classification Number: C71     

Information Disclosure to Employees and Rational Expectations: a Game-Theoretical Perspective: a Comment

In this comment we identify the key features of the Frantz and Walker (1997) game theoretic model that drive the non-disclosure equilibrium result in their paper. We argue that, although technically correct, their model fails to capture certain aspects of real-world wage bargaining that will be important in determining optimal disclosure strategies in practice. However, Frantz and Walker's paper illustrates the potential of analytical techniques to contribute to the employee disclosure debate.     

Rationalizability and equilibrium in N-person sequential bargaining

Summary. This paper deals with N-person sequential bargaining games with complete information. For N-person sequential bargaining games, uniqueness of the SPE has been obtained by allowing the players to exit with partial agreements. Adopting a non-equilibrium approach, we show that N-person sequential bargaining games with exit are solvable by a refinement of rationalizability for multi-stage games (trembling-hand rationalizability) whatever the impatience of the players. That is, once we adopt the non-equilibrium approach, the exit opportunity still fulfils its original aim: we achieve a unique solution by introducing the exit opportunity. Moreover, this unique solution is the unique SPE. Received: October 30, 1996; revised version: July 7, 1998     

Offshoring and Reshoring: The Roles of Incomplete Contracts and Relative Bargaining Power

This paper demonstrates that an increase in bargaining power of Northern firms relative to that of their Southern contractors can trigger reshoring if the North-South wage differential is moderate, such that only industries with a high share of unskilled labor find outsourcing profitable. However, such an increase in Northern bargaining power can increase offshoring if the wage differential is so high that even industries with a low share of unskilled labor also offshore.     

Labour unions and leverage: evidence from firm-level union data

ABSTRACT

Using firm-level labour union data from Japan, this paper investigates the effect of labour unions on firm leverage. We find that as union coverage increases, both the level of and extent of change in leverage decreases. These relations remain robust when a firm falls into deficit. We also find that firms with higher union coverage have a higher interest coverage ratio. In addition, we find that firms with higher union coverage are less likely to choose issuing debt compared to issuing equity when they face financial distress. Our results imply that significant employee influence enhanced by labour unions increases fixed costs, crowds out the firm’s debt capacity and consequently reduces the firm’s leverage.     

An Experimental Study of the Effect of Private Information in the Coase Theorem

We investigate, in an experimental setting, the effect of private information on the Coase theorem's predictions of efficiency and allocative neutrality. For a two-person bargaining game, we find significantly more inefficiency and allocative bias in the case of private information compared with the case of complete information. We also find substantial bargaining breakdown, which is not predicted by the Coase theorem. For the case of private information, we reject the Coase theorem in favor of the alternative of a generalized version of the Myerson—Satterthwaite theorem, which predicts inefficiency, allocative bias in the direction of the disagreement point, and some bargaining breakdown.     

Outsiders' threat and consecutive offers

Summary. We study the effects of outsiders' threat and consecutive offers in the two-person bargaining model of Shaked and Sutton (1984). In our first model, there are no outsiders and the firm can make two consecutive offers for every given number of periods. Our first model has the same unique equilibrium as in Shaked and Sutton (1984). In our second model, the firm can switch between rival partners but cannot change the alternating proposing sequence. Our second model has the same perfect equilibrium as in Rubinstein (1982). So the key factor that leads to the equilibrium of Shaked and Sutton (1984) is the possibility of firm's consecutive offers, not the outsiders' threat. Received: 23 December 1998; revised version: 21 May 1999     

A bargaining model of voluntary environmental agreements

We present an explicit model of firm-regulator negotiations in a market with several firms. We describe how the regulatory surplus is distributed between firms and regulator, and analyse the impact of various parameters on the resulting level of environmental regulation. Our main result is that a ‘toughest firm principle’ holds: the outcome of negotiations is essentially determined by the firm with the most aggressive attitude towards environmental control.