Markus Reisinger

Abstract: 

In most bargaining situations with multiple parties, the negotiation sequence is crucial for the efficiency of outcomes and the parties' success. However, the driving forces behind the socially and privately optimal sequences are poorly understood. To study these issues, we consider a general framework of bilateral negotiations between a principal and two agents with bargaining externalities. We show that the agents' bargaining strengths are essential for the determination of the sequence. The surplus is highest if the principal negotiates with the stronger agent first, regardless of externalities being positive or negative. The principal always chooses the efficient sequence if externalities are negative. Instead, if externalities are positive, the principal often prefers to negotiate with the weaker agent first. We show that our results extend to a general number of agents, demonstrate that the sequence can be non-monotonic in the externalities, and provide conditions for simultaneous negotiations to be optimal.