Skip to main content
SpringerLink
Log in

Multidimensional bargains and the desirability of ex post inefficiency

  • Published:
Journal of Risk and Uncertainty Aims and scope Submit manuscript

Abstract

In multidimensional bargaining situations where individuals possess relevant private information, say about preferences, allocational efficiency is a central concern. Even if there is no squabbling over distribution—for example, if contingent commitments on allocations can be made before private information is secured—honest revelation comes only by sacrificing efficiency. Indeed, the incentive-compatible, second-best outcomes generally require that some allocations be off the contract curve (ex post inefficient). The potential for recontracting, by ruling out such inefficient allocations and the second-best equilibria they support, would hurt matters further.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • D'Aspremont, C. and L.-A., Gerard-Varet. (1979). “Incentives and Incomplete Information”,Journal of Public Economics 11, 25–45.

    Google Scholar 

  • Chatterjee, K. and W., Samuelson. (1983). “Bargaining under Incomplete Information”,Operations Research 31, 835–851.

    Google Scholar 

  • Chatterjee, K., J.W., Pratt, and R.J., Zeckhauser. (1978). “Paying the Expected Externality for a Price Quote Achieves Bargaining Efficiency”,Economic Letters 1, 311–313.

    Google Scholar 

  • Holmstrom, B. (1977). “On Incentives and Control in Organizations”. Ph.D. dissertation, Graduate School of Business, Stanford University.

  • Myerson, R.B. and M.A., Satterthwaite. (1983). “Efficient Mechanisms for Bilateral Trading”.Journal of Economic Theory 29, 265–281.

    Google Scholar 

  • Nichols, A.L. and R.J., Zeckhauser. (1982). “Targeting Transfers through Restrictions on Recipients”,American Economic Review 72, 372–377.

    Google Scholar 

  • Pratt, J.W. and R.J., Zeckhauser. (1987). “Incentive-based Decentralization: Expected-Externality Payments Induce Efficient Behaviour in Groups.” In G.R., Feiwel (ed.),Arrow and the Ascent of Modern Economic Theory. New York: New York University Press, pp. 439–483.

    Google Scholar 

  • Raiffa, H. (1982).The Art and Science of Negotiation. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Rosenthal, R. (1978). “Arbitration of Two-Party Disputes under Uncertainty,”Review of Economic Studies 45, 595–604.

    Google Scholar 

  • Spence, M. (1973). “Job Market Signaling,”Quarterly Journal of Economics 87, 355–374.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Harvard Business School, 02163, Boston, MA

    John W. Pratt

  2. John F. Kennedy School of Government, Harvard University, 79 John F. Kennedy St., 02138, Cambridge, MA

    Richard Zeckhauser

Authors
  1. John W. Pratt
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Richard Zeckhauser
    View author publications

    You can also search for this author in PubMed Google Scholar

Additional information

Support was received from the Decision, Risk and Management Science Program of the National Science Foundation. Rachel Algaze Croson provided able assistance; referees provided helpful comments.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Pratt, J.W., Zeckhauser, R. Multidimensional bargains and the desirability of ex post inefficiency. J Risk Uncertainty 5, 205–216 (1992). https://doi.org/10.1007/BF00057878

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF00057878

Key words

Search

Navigation