Transaction Costs Can Unlock Stable Bargaining for Three Parties
The article shows that in situations involving three parties, problems of instability can prevent agreements even when bargaining obstacles are low. They discovered that adding transaction costs can make these unstable situations more likely to reach agreements, which helps to uphold the Coase Theorem about bargaining solutions. Particularly, they found that introducing transaction costs in frictionless bargaining can make unstable agreements more stable, improving the chances of successful negotiations. This indicates that, under certain conditions, transaction costs can actually help encourage successful bargaining between three parties.