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

Published online by Cambridge University Press:  14 March 2025

Andrzej Baranski Open the ORCID record for Andrzej Baranski [Opens in a new window]
Andrzej Baranski*
Affiliation:
Department of Social Science, New York University Abu Dhabi, P.O. Box 129188 Abu Dhabi, UAE
*
[email protected]
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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 bargainingProfit sharingPublic goodsInequityBaron and Ferejohn (1989)
Type
Original Paper
Information
Experimental Economics , Volume 22 , Issue 4 , December 2019 , pp. 857 - 884
Copyright
Copyright © 2018 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (https://doi.org/10.1007/s10683-018-9591-2) contains supplementary material, which is available to authorized users.

I would like to thank John H. Kagel for supporting a pilot test and useful comments in the development of the project. I benefitted greatly from conversations with Ernesto Reuben, Arno Riedl, Martin Strobel, Alexander Cappelen, Jordi Brandts, Nikos Nikiforakis, María Montero, Joerg Oechssler, Eric Van Damme, and Patrick Schmitz. Comments obtained from participants at seminars in Nottingham University, Maastricht University, Universidad Pontificia Javeriana in Bogotá, 15th TIBER Symposium on Psychology and Economics (Tilburg 2016), and the 13th Workshop on Employee Ownership and Shared Capitalism organized by the Rutgers School of Management and Labor Relations (La Jolla, 2016) are gratefully acknowledged. Two anonymous referees and the editor, Roberto Weber, provided valuable suggestions. All errors are my own.

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Supplementary material: File

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Online Appendix for: Endogenous Claims and Collective Production: An Experimental Study on the Timing of Proit-Sharing Negotiations and Production
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Supplementary material: File

Baranski supplementary material

Online Appendix for “Endogenous Claims and Collective Production: An Experimental Study on the Timing of Profit-Sharing Negotiations and Production
Download Baranski supplementary material(File)
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