The role of risk preferences in bargaining when acceptance of a proposal requires less than unanimous approval |
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Authors: | Joseph E. Harrington Jr. |
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Affiliation: | 1. Department of Economics, The Johns Hopkins University, 21218, Baltimore, Maryland
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Abstract: | The role of risk preferences in determining the outcome to bargaining is examined for the case in which acceptance of a proposal requires less than unanimous approval. Using an n-agent extension of the Ståhl-Rubinstein alternating offer model, we find that risk preferences play a fundamentally different role when bargaining is settled using a nonunanimity voting rule. Risk preferences determine not only an agent's reservation price but also the likelihood that he is made part of the winning coalition. An implication of this analysis is that when the preferences of the agents are not too diverse, it is advantageous for an agent to be relatively risk-averse.The helpful comments and suggestions of Rich McLean and an anonymous referee are gratefully acknowledged. This article was presented as a paper at the 1988 Winter Econometric Society Meetings. |
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Keywords: | bargaining risk aversion nonunanimity voting rules alternating offer model |
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