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Experimental Economics

, Volume 22, Issue 4, pp 857–884 | Cite as

Endogenous claims and collective production: an experimental study on the timing of profit-sharing negotiations and production

  • Andrzej BaranskiEmail author
Original Paper
  • 177 Downloads

Abstract

We explore the efficiency and distributive implications of a multilateral bargaining model with endogenous production of the surplus under two different timings: ex ante and ex post bargaining. Both timings are commonly observed in business partnerships and alliance formations. The theoretical predictions confirm an intuitive economic tenet: in ex post bargaining, effort is considered sunk and opportunistic bargaining behavior will dissuade players from producing. On the other hand, ex ante bargaining entails an allocation of ownership shares that induces at least certain members to invest in the common fund because their return is guaranteed. Experiments show opposite results: ex post bargaining yields almost fully efficient outcomes while the reverse timing entails near zero efficiency. The psychological theory of inequity is useful in reconciling these divergent results.

Keywords

Multilateral bargaining Profit sharing Public goods Inequity Baron and Ferejohn (1989) 

Supplementary material

10683_2018_9591_MOESM1_ESM.pdf (132 kb)
Supplementary material 1 (pdf 131 KB)
10683_2018_9591_MOESM2_ESM.pdf (901 kb)
Supplementary material 2 (pdf 900 KB)

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Copyright information

© Economic Science Association 2018

Authors and Affiliations

  1. 1.Department of Social ScienceNew York University Abu DhabiAbu DhabiUAE

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