Coordination through bargaining in weakest-link games

Abstract

Coordination problems are often modeled as weakest-link games, where the minimum-contributing agent determines their group’s surplus to be shared in equal parts. Yet in many settings, the sharing of a jointly-produced surplus occurs through bargaining, which acts as a double-edged sword: It can promote effort by disciplining low contributors or deter it through the added uncertainty of returns. We present experimental evidence that bargaining improves coordination by promoting equitable divisions that reward higher contributions, even in one-shot interactions. High contributors are more likely than low contributors to propose allocations that reward effort, creating a virtuous cycle that increases efficiency. Allowing groups to endogenously select who can act as proposers can backfire: Efficiency increases when high contributors are endorsed but falls otherwise. These results highlight the scope and limits of participatory surplus division mechanisms in providing incentives for efficient coordination.