Bargaining cum voice |
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Authors: | Hans Gersbach Hans Haller |
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Institution: | (1) School of Business & Economics, Freie Universit?t Berlin, Boltzmannstr. 20, D-14915 Berlin, Germany;(2) Department of Economics, University of Helsinki, P.O. Box 17, Arkadiankatu 17, FI-00014 Helsinki, Finland |
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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. |
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