SBE-RCUK Lead Agency: Sequential Bargaining with Externalities

Overview:

This proposal studies sequential contributions to public goods and joint projects in environments with
transactional frictions. The proposed research has three components. The first component focuses on the
presence of a principal as a source of coordination for the completion of a single public good or collective
agreement. Motivating examples for this component include bankruptcy restructuring, lobbying/vote
buying, technology adoption with network externalities, and corporate takeovers. The researchers
consider the effect on outcomes and welfare of strengthening agents' formal bargaining power relative to
the principal. The second component studies sequential contributions to competing public goods in a fully
decentralized environment (without a principal). Prominent applications include donations to alternative
organizations, and collective effort in flexible environments, as in open source programming. The
researchers study efficiency, delay, and the optimal organization of tasks and teamwork in this context.
The third component reintroduces principals in the multiple joint projects environment. Motivating
examples for this component are a congressional party leader leading the party's agenda over diverse
issues, a university's development office seeking contributions, and donations with large donors. The
researchers study how principals actively manage the intertemporal externalities generated by multiple
projects.

Intellectual Merit:

This proposal is related to the literature on contracting with externalities, delay in bargaining models with
complete information, and private contributions to public goods. It complements these works by studying
contributions to multiple projects and the role of principals in dynamic environments with frictions. To do
this, the PIs develop a family of closely related models of multilateral bargaining in the presence of
externalities, where tasks and contracting are not undertaken by all agents simultaneously. Focusing on
sequential bargaining highlights previously unexplored incentives for free riding and their implications
for delay and efficiency, while the existence of multiple joint projects generates new incentives for
coordination across projects. A key step in this proposal is to obtain a general tractable model to uncover
common forces behind sequential contributions to multiple public goods in different setups. The proposed
model is flexible, and the techniques developed can be used by future researchers concerned with
incentives in organizations, charities, etc.

Broader Impacts:

This research encompasses a variety of applications, ranging from fundraising and donations, to team
production and legislative bargaining. The results from this proposal will help to better organize these
activities in both government and the private sector. In terms of fundraising, for example, this proposal
will provide guidance about how to optimally bundle different public causes when there are multiple
small donors and how to organize fundraising in the presence of large donors. In terms of effort in teams,
it will shed light on how to organize team cooperation with multiple active projects. Results will also be
applicable to optimal organization for modern R&D companies, and open source software communities.
The third component, for example, is particular relevant for the design of the institutions regulating
bankruptcy reorganizations. The project will be carried out by two researchers based in the UK and US.
Since this proposal involves two different universities in two different continents, it will benefit from two
different institutional dissemination efforts in order to reach non-academic audiences and the general
public. Students will also be involved to discuss related literature, explore results of simplified models
under alternative assumptions, and aid in numerical computations.

This research encompasses a variety of applications, ranging from fundraising and donations, to team
production and legislative bargaining. The results from this proposal will help to better organize these
activities in both government and the private sector. In terms of fundraising, for example, this proposal
will provide guidance about how to optimally bundle different public causes when there are multiple
small donors and how to organize fundraising in the presence of large donors. In terms of effort in teams,
it will shed light on how to organize team cooperation with multiple active projects. Results will also be
applicable to optimal organization for modern R&D companies, and open source software communities.
The third component, for example, is particular relevant for the design of the institutions regulating
bankruptcy reorganizations. The project will be carried out by two researchers based in the UK and US.
Since this proposal involves two different universities in two different continents, it will benefit from two
different institutional dissemination efforts in order to reach non-academic audiences and the general
public. Students will also be involved to discuss related literature, explore results of simplified models
under alternative assumptions, and aid in numerical computations.