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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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Cited by:
  1. Helmut Bester & Roland Strausz, . "Contracting with Imperfect Commitment and Noisy Communication," Papers 017, Departmental Working Papers.
  2. 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.
  3. 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.
  4. Maria Goltsman, 2011. "Optimal information transmission in a holdup problem," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 495-526, 09.
  5. Krahmer, Daniel, 2006. "Message-contingent delegation," Journal of Economic Behavior & Organization, Elsevier, vol. 60(4), pages 490-506, August.
  6. 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.
  7. Goltsman, Maria & Pavlov, Gregory, 2011. "How to talk to multiple audiences," Games and Economic Behavior, Elsevier, vol. 72(1), pages 100-122, May.
  8. Doornik, Katherine, 2014. "A rationale for mediation and its optimal use," International Review of Law and Economics, Elsevier, vol. 38(C), pages 1-10.
  9. Pinghan Liang, 2010. "Transfer of Authority within Hierarchy," Levine's Working Paper Archive 661465000000000139, David K. Levine.

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