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This paper analyzes the implications of bilateral bargaining over wages and employment between a producer and a union representing a finite number of identical workers in a monetary macroeconomic model of the AS AD type with government activity. Wages and aggregate employment levels are set according to an efficient (Nash) bargaining agreement while the commodity market is cleared in a competitive way. It is shown that, for each level of union power, measured by the share it obtains of the total production surplus, efficient bargaining implies no efficiency loss in production. However, due to the price feedback from the commodity market and to income-induced demand effects, all temporary equilibria with a positive labor share are not Nash bargaining-efficient with respect to the set of feasible temporary equilibrium allocations. The dynamic evolution of money balances, prices, and wages is analyzed being driven primarily by government budget deficits and expectations by consumers. It is shown that for each fixed level of union power, the features of the dynamics under perfect foresight are structurally identical to those of the same economy under competitive wage and price setting, i.e. for small levels of government demand, there exist two balanced paths generically, one of which with high employment and production is always unstable while the other one may be stable or unstable.

In "Bargaining to Lose: The Permeability Approach to Post Transition Resource Extraction" [1] Natasha Chichilnisky-Heal introduces an original and fertile explanation for the resource curse. Her "permeability" approach questions the treatment of the state as a decision maker having the public good as an objective, and replaces it by the results of a bargaining game between the state and International organizations. Her new theory is illustrated with unique hands-on experience in the case of copper and gold mines in Mongolia and Zambia, and focuses on a bargaining game between the state and key financial organizations: the Bretton Woods Institutions (IMF, World Bank) and MNCs. This piece extends and generalizes "Bargaining to lose" providing economic models that validate the original conclusions, and exploring its implications for the global commons: the atmosphere, the oceans and biodiversity. Chichilnisky-Heal's "permeable state" is a transition to a new globalized society where the sovereign state - a relatively recent creation - is receding giving rise to a new set of global economic agents and institutions that better explain the dynamics of the global commons. We show that the permeable state complements other explanations for the resource curse [2] as a global market failure magnified by globalization and based on the lack of well-defined property rights on natural resources during the pre-industrial period. We generalize Chichilnisky-Heal's "bargaining to lose" approach to the resource curse and explore its natural implications for the environmental crisis on the global commons. The solutions that Chichilnisky-Heal proposes, e.g. limiting the Bretton Woods' Institutions' 'seat at the negotiation table' of resource extraction contracts, could help resolve the environmental crisis that is based on over-extraction of global resources.

A central authority designs and implements the college admissions process in Turkey. All applicants are required to take an SAT-like test and submit their preferences over the departments. Then, the central authority places the applicants in departments by considering the test scores and stated preferences of the applicants and the capacities of the departments. This procedure generates a fair placement if there are no restrictions on stating preferences. However, the applicants are restricted to state preferences over at most 24 departments out of 4022 available departments. In this paper, by using the college admissions data set of the year 2005, we estimate that the number of applicants who had an unfair placement due to this restriction is equivalent to 2.4 percent of the number of applicants who placed in a department.

This paper studies allocations that can be implemented by an arbitrator subject to the constraint that the agents' outside option is to start bargaining by themselves. As the population becomes large, the set of implementable allocations shrinks to a singleton point - the conflict-free allocation. Finally, the conflict-free allocation can be implemented via a simple "lobbying" game where parties composed of agents with similar preferences bid for the right to be the first proposer in a bargaining game among the parties, i.e. in the "political game".

Firms and workers may sign complex contracts that govern many aspects of their interactions. I show that when firms regard contracts as substitutes, bargaining over contracts can be understood as bargaining only over wages. Substitutes is the assumption commonly used to guarantee the existence of stable matchings of workers and firms. JEL: C78, D86, J31, J41

We examine the relationship between voting weights and expected equilibrium payoffs in legislative bargaining and provide a necessary and sufficient condition for payoffs to be proportional to weights. This condition has a natural interpretation in terms of the supply and demand for coalition partners. An implication of this condition is that Snyder et al.´s (2005) result, that payoffs are proportional to weights in large replicated games, does not necessarily extend to the smaller games that arise in applications. Departures from proportionality may be substantial and may arise even in well-behaved (homogeneous) games.

This paper analyses a model of legislative bargaining in which parties form tentative coalitions (protocoalitions) before deciding on the allocation of a resource. Protocoalitions may fail to reach an agreement, in which case they may be dissolved (breakdown) and a new protocoalition may form. We show that agreement is immediate in equilibrium, and the proposer advantage disappears as the breakdown probability goes to zero. We then turn to the special case of apex games and explore the consequences of varying the probabilities that govern the selection of formateurs and proposers. Letting the breakdown probability go to zero, most of the probabilities considered lead to the same ex post pay-off division. Ex ante expected pay-offs may follow a counterintuitive pattern: as the bargaining power of weak players within a protocoalition increases, the weak players may expect a lower pay-off ex ante.

In the context of international bargaining, standard models predict that a shift in military power can cause preventive war because it changes the relative bargaining position between states. We find that shifts in military power are not the only cause of war under commitment problems and that commitment problems per se are not necessarily a cause of war even if the relative bargaining position changes substantially. ; Plötzliche und substantielle Verlagerungen der militärischen Stärke zwischen Staaten gelten in der relevanten Literatur als mögliche Ursache von Präventionskriegen. Formal betrachtet kann eine Verlagerung der militärischen Stärke zu einer Veränderung der relativen Verhandlungsposition führen. Dies bedeutet, dass ein militärisch schwächer werdender Staat befürchten muss, in zukünftigen Verhandlungen mit einem militärisch stärker werdenden Staat, ein schlechteres Verhandlungsergebnis zu erzielen. Wenn der stärker werdende Staat nicht glaubhaft versichern kann, seine Stärke nicht zu nutzen, um in Zukunft ein besseres Ergebnis zu erreichen, kann es aus Sicht des schwächer werdenden Staates rational sein, durch sofortigen Krieg, seine gegenwärtige Stärke auszunutzen, um ein Ergebnis herbeizuführen, das in Zukunft durch Verhandlung nicht mehr möglich ist. Wir erweitern das in der Literatur etablierte Verhandlungsmodell und zeigen, dass eine plötzliche und substantielle Verlagerung der militärischen Stärke nicht der einzige Grund ist, warum es zu einem Präventionskrieg kommen kann. Zudem untersuchen wir weitere Gründe, die zu einer veränderten Verhandlungsposition führen können und finden heraus, dass selbst eine deutliche Verschiebung der relativen Verhandlungsposition im Gleichgewicht nicht notwendigerweise Krieg zur Folge hat.

This paper analyzes the effect of spillovers and congestion of local public goods on the segregative properties of endogenous formation of jurisdiction. Households living in the same place form a jurisdiction and produce a local public good, that creates positive spillovers in other jurisdictions and suffers from congestion. In every jurisdiction, the production of the local public good is financed through a local tax on household's wealth. Local wealth tax rates are democratically determined in all jurisdictions. Households also consume housing in their jurisdiction. Any household is free to leave its jurisdiction for another one that would increase its utility. A necessary and sufficient condition to have every stable jurisdiction structure segregated by wealth, for a large class of congestion measure and any spillovers coefficient structure, is identified: the public good must be a gross substitute or a gross complement to the private good and the housing.

When voting takes place in democratic institutions, we find (either explicitly or implicitly) that there is an agenda setter or a formateur. Such players are uniquely able to make substantive proposals for given topics. Their statuses remain intact even after rejection of proposals, but they must revise rejected proposals constructively (e.g. towards a compromise). We model this in a general environment, show that the equilibrium outcome is generically unique, and characterize it explicitely. The equilibrium outcome is robust to (partially) binding communication between the formateur and the voters. As illustrations, we consider majority bargaining about a cake (leaned on Baron and Ferejohn,1989),where the formateur ends up being a perfect dictator, and a model of legislative voting (leaned on Jackson and Moselle,2002), where he is a dictator if his ideological position is within the quartiles of the parliament. In these cases, our model implements (reversed) McKelvey majority path. Depending on the valuations, the formateur´s power may be weakened when parliamentary decisions can be revised, as this may faciliate tacit collusion amongst the voters.

Bargaining is ubiquitous in real-life. It is a major dimension of political and business activities. It appears at the international level, when governments negotiate on matters ranging from economic issues (such as the removal of trade barriers), to global security (such as fighting against terrorism) to environmental and related issues (e.g. climate change control). What factors determine the outcome of negotiations such as those mentioned above? What strategies can help reach an agreement? How should the parties involved divide the gains from cooperation? With whom will one make alliances? This paper addresses these questions by focusing on a non-cooperative approach to negotiations, which is particularly relevant for the study of international negotiations. By reviewing non-cooperative bargaining theory, non-cooperative coalition theory, and the theory of fair division, this paper will try to identify the connection among these different facets of the same problem in an attempt to facilitate the progress towards a unified framework.