When and with Whom to Negotiate: Optimal Agenda under Quota Rules

Speaker: A/Prof Duygu Yengin

Affiliation: University of Adelaide

Location: Room 237, Steele Building (#03), St Lucia Campus

Zoom: https://uqz.zoom.us/j/82603079317

Abstract: We study a multilateral bargaining game between a buyer and multiple heterogeneous sellers, each holding one object, motivated by land assembly and other collective asset sales. The buyer aims to acquire all objects for a project and can strategically select which seller to approach in each period. We introduce a quota rule, which weakens individual property rights: sellers retain full control up to a quota, but beyond that the buyer can enforce agreements, creating a hybrid property–liability rule that blends elements of traditional property rights and eminent domain. Sellers’ and the buyer’s bargaining power depends on their inside and outside options, reflecting subjective and market values. We provide a characterization of the optimal bargaining agenda and the resulting equilibrium outcomes under both finite and infinite horizon models. We show that the quota rule prevents the buyer from always targeting the lowest-markup sellers, as sellers’ outside options and strategic leverage are affected by the quota. Optimal bargaining de- pends on sellers’ markups, players’ patience, and the horizon: with similar markups or patient players, low-markup sellers are approached in alternation; with larger markup differences or lower patience, a single seller may be targeted repeatedly. Finite-horizon games yield a unique equilibrium, whereas infinite-horizon games produce infinitely many efficient equilibria and generally allow higher payoffs for sellers. These results highlight how institutional rules, such as hybrid property–liability quotas, interact with bargaining power to shape trade outcomes and pricing, providing insights relevant for the design of compensation and acquisition policies in contexts where collective agreement is sufficient for project completion.