Journal Article

The Scope of Anonymous Voluntary Bargaining Under Asymmetric Information

Ehud Lehrer and Zvika Neeman

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 67, issue 2, pages 309-326
Published in print April 2000 | ISSN: 0034-6527
Published online April 2000 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00133
The Scope of Anonymous Voluntary Bargaining Under Asymmetric Information

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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)

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Subjects: Economics

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