The Scope of Anonymous Voluntary Bargaining Under Asymmetric Information

We present a model of anonymous collective bargaining where individuals' preferences and information may be significantly interdependent. We show that the bargaining outcome becomes independent of individuals' preferences and information as the bargaining group increases in size. As a coro...

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Bibliographic Details
Published in:The Review of economic studies 2000-04, Vol.67 (2), p.309-326
Main Authors: Lehrer, Ehud, Neeman, Zvika
Format: Article
Language:English
Subjects:
Collective bargaining
Economic theory
Ergodic theory
Information asymmetry
Integers
Lotteries
Mechanism design
Perceptron convergence procedure
Property rights
Random variables
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Summary:We present a model of anonymous collective bargaining where individuals' preferences and information may be significantly interdependent. We show that the bargaining outcome becomes independent of individuals' preferences and information as the bargaining group increases in size. As a corollary, we show that anonymous voluntary bargaining completely fails in large groups. Either the difference between the bargaining outcome and the status quo vanishes as the size of the group becomes larger, or, the bargaining becomes coercive and results in a violation of at least some individuals' rights. The result provides a rationale for the inherent difficulty of reform in the presence of asymmetric information. “There is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to initiate a new order of things.” Niccolò Machiavelli, The Prince (1532)
ISSN:0034-6527
1467-937X
DOI:10.1111/1467-937X.00133