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Mediation in Situations of Conflict and Limited Commitment

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  • Kay Mitusch
  • Roland Strausz

Abstract

We study the reasons and conditions under which mediation is beneficial when a principal needs information from an agent to implement an action. Assuming a strong form of limited commitment, the principal may employ a mediator who gathers information and makes nonbinding proposals. We show that a partial revelation of information is more effective through a mediator than through the agent himself. This implies that mediation is strictly helpful if and only if the likelihood of a conflict of interest is positive but not too high. The value of mediation depends nonmonotonically on the degree of conflict. Our insights extend to general models of contracting with imperfect commitment. Copyright 2005, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal The Journal of Law, Economics, and Organization.

Volume (Year): 21 (2005)
Issue (Month): 2 (October)
Pages: 467-500

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Handle: RePEc:oup:jleorg:v:21:y:2005:i:2:p:467-500

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  6. Forges, Francoise, 1988. "Can sunspots replace a mediator?," Journal of Mathematical Economics, Elsevier, vol. 17(4), pages 347-368, September.
  7. Jean-Jacques Laffont & Jean Tirole, 1985. "The Dynamics of Incentive Contracts," Working papers 397, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. FORGES, Françoise, . "Equilibria with communication in a job market example," CORE Discussion Papers RP -885, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Laffont, Jean-Jacques & Tirole, Jean, 1990. "Adverse Selection and Renegotiation in Procurement," Review of Economic Studies, Wiley Blackwell, vol. 57(4), pages 597-625, October.
  10. Baker, George & Gibbons, Robert & Murphy, Kevin J, 1999. "Informal Authority in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 56-73, April.
  11. Kay Mitusch & Roland Strausz, . "Mediators and Mechanism Design: Why Firms Hire Consultants," Papers 005, Departmental Working Papers.
  12. Fudenberg, D. & Levine, D.K. & Maskin, E., 1989. "The Folk Theorem With Inperfect Public Information," Working papers 523, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
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Cited by:
  1. Goltsman, Maria & Pavlov, Gregory, 2011. "How to talk to multiple audiences," Games and Economic Behavior, Elsevier, vol. 72(1), pages 100-122, May.
  2. Pinghan Liang, 2010. "Transfer of Authority within Hierarchy," Levine's Working Paper Archive 661465000000000139, David K. Levine.
  3. Bester, Helmut & Strausz, Roland, 2007. "Contracting with imperfect commitment and noisy communication," Journal of Economic Theory, Elsevier, vol. 136(1), pages 236-259, September.
  4. Doornik, Katherine, 2014. "A rationale for mediation and its optimal use," International Review of Law and Economics, Elsevier, vol. 38(C), pages 1-10.
  5. Krahmer, Daniel, 2006. "Message-contingent delegation," Journal of Economic Behavior & Organization, Elsevier, vol. 60(4), pages 490-506, August.
  6. Maria Goltsman, 2011. "Optimal information transmission in a holdup problem," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 495-526, 09.
  7. Mitusch, Kay, 2006. "Non-commitment in performance evaluation and the problem of information distortions," Journal of Economic Behavior & Organization, Elsevier, vol. 60(4), pages 507-525, August.
  8. Kohei Kawamura, 2007. "Constrained Communication with Multiple Agents: Anonymity, Equal Treatment, and Public Good Provision," ESE Discussion Papers 166, Edinburgh School of Economics, University of Edinburgh.
  9. Kohei Kawamura, 2006. "Anonymity, Equal Treatment, and Overconfidence: Constraints on Communication May Enhance Information Transmission," Economics Series Working Papers 268, University of Oxford, Department of Economics.

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