(Welfare) effects of joint versus independent bargaining

Abstract

This thesis examines the impact of joint bargaining on market outcomes and welfare in comparison to individual negotiations. Using theoretical models rooted in game theory and industrial organization, it introduces the Nash-in-Nash bargaining framework into the Hotelling model for the first time. The analysis considers three distinct scenarios: individual firm price setting, collective consumer bargaining with producers, and collective bargaining on both sides of the market. These scenarios are further investigated under both symmetric and asymmetric cost structures. With respect to the bargaining setup, the findings reveal that negotiating jointly, rather than independently, can improve a party's outcome (surplus), a result that applies to both consumers and producers. Bargaining power primarily influences the distribution of welfare without affecting the total amount of welfare generated. However, the presence of cost asymmetry adds an efficiency dimension to the bargaining process, where greater consumer bargaining power can enhance total welfare by aligning prices and demand allocation more effectively with cost structures. The study contributes to the understanding of bargaining dynamics by offering policy recommendations and identifying pathways for further research, including for example the incorporation of heterogeneous consumer preferences and dynamic negotiation strategies.

Date of Award	31 Jan 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Duarte Brito (Supervisor)