Many of the motivating examples and applications of non-cooperative bargaining involve groups bargaining against each other. However, much of the literature ignores the structures of profit sharing within the group. This structure determines the incentives for each player and there by determines the bargaining power of each group. We construct a model in which two groups of individuals are engaged in alternate offer bargaining (as in Rubinstein (1982)) subject to ratifications of the legislatures in a manner akin to Baron & Ferejohn (1989). This model allows us to answer some of the fundamental questions that arise in an environment where groups bargain against each other. First, we show that, counter to common intuition the smaller a group is, the more it is able to extract (for the group) in bargaining. This implies that dictatorships have an innate advantage in bargaining against democracies. Second, we show that a democracy is able to ameliorate some of this concern by employing super-majority requirements in the ratification of international treaties. Lastly, we show that the equilibrium outcomes are robust to modifying the ratification protocol by allowing the original proposer to propose allocations to non-group members.
Author(s): Ravideep Sethi, WonSeok Yoo