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Mediators and Mechanism Design: Why Firms Hire Consultants

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  • Kay Mitusch

    ()

  • Roland Strausz

    ()

Abstract

This paper offers a new type of explanation for economic institutions as playing the role of mediators in the sense of Myerson (1985) to facilitate communication in contracting settings with ex ante asymmetric information and limited commitment. It derives necessary and sufficient conditions under which mediation is strictly helpful and provides a straightforward, yet general intuition for this result. As an application of our idea we explain the widely observed use of consultants during the restructure of firms.

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File URL: http://userpage.fu-berlin.de/%7Elsbester/papers/consult.pdf
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Bibliographic Info

Paper provided by Departmental Working Papers in its series Papers with number 005.

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Handle: RePEc:bef:lsbest:005

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Keywords: mechanism design; communication equilibrium; limited commitment;

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References

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  1. Laffont, Jean-Jacques & Tirole, Jean, 1988. "The Dynamics of Incentive Contracts," Econometrica, Econometric Society, vol. 56(5), pages 1153-75, September.
  2. Forges, F., 1987. "Can sunspots replace a mediator ?," CORE Discussion Papers 1987045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Forges, Francoise M, 1986. "An Approach to Communication Equilibria," Econometrica, Econometric Society, vol. 54(6), pages 1375-85, November.
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Cited by:
  1. Kay Mitusch & Roland Strausz, 2000. "Mediation in Situations of Conflict," Econometric Society World Congress 2000 Contributed Papers 0361, Econometric Society.
  2. Krähmer, Daniel, 2002. "Delegation versus authority," Discussion Papers, Research Unit: Market Processes and Governance FS IV 02-26, Social Science Research Center Berlin (WZB).
  3. A. Fedele & A. Mantovani, 2010. "The Importance of Being Consulted," Working Papers 712, Dipartimento Scienze Economiche, Universita' di Bologna.
  4. Alessandro Fedele & Andrea Mantovani & Francesco Liucci, 2010. "Credit Availability in the crisis: which role for the European Investment Bank Group?," Working Papers 1005, University of Brescia, Department of Economics.
  5. Alessandro Fedele & Francesco Liucci & Andrea Mantovani, 2009. "Credit availability in the crisis: the European investment bank group," Working Papers 0913, University of Brescia, Department of Economics.
  6. Roland Strausz & Kay Mitusch, . "Mediation in Situations of Conflict and Limited Commitment," Papers 023, Departmental Working Papers.
  7. Peter Vida, 2005. "A Detail-free Mediator and the 3 Player Case," IEHAS Discussion Papers 0511, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

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