The Bargaining Society: An essay in memory of LJ

Multi party negotiations within a complicated pattern of coalitions are typical for bargaining societies like the Nordic countries. Inefficiency in some bargaining constellations enhances the benefits from overall cooperation and therefore for the chances that the grand coalition forms. To substantiate and defend this claim I discuss four assertions. i) Encompassing organizations can lead to efficacy: threats and counter threats in central negotiations can induce a binding agreement that resembles the competitive market equilibrium. ii) To fulfill all demands in central negotiations can be impossible: when all possible coalitions can threaten to break out and start negotiations over the terms to return, cooperation easily fails. iii) Cooperation should have a non-cooperative foundation: when only intermediate coalitions that remain stable in the non-cooperative equilibrium can pose a threat, endogenous overall cooperation is more easily sustained. iv) Negotiations based on distorted information lead to inefficiency: intermediate bargaining may have an inherent tendency to eliminate the potential gain that is the object of the bargaining - but thus raise the gains from cooperation.