Optimal Delegation in Nash Bargaining
AbstractWhen appointing a representative in negotiations, the principal can o er his agent a offer contract that promises a percentage of the bargaining result, and a bonus payment result (or penalty) if bargaining fails. Conventional wisdom of contract theory seems to suggest that the share should be as great as possible to provide proper incentives for a risk-neutral agent, while the bonus should be small or even negative. Drawing on the symmetric Nash bargaining solution, this paper argues that the optimal share is rather small, whereas the optimal bonus is rather large.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 09001.
Length: 9 pages
Date of creation: Jan 2009
Date of revision:
Contact details of provider:
Postal: Universitätsplatz 2, Gebäude W und I, 39106 Magdeburg
Phone: (0391) 67-18 584
Fax: (0391) 67-12 120
Web page: http://www.ww.uni-magdeburg.de
More information through EDIRC
Endogenous threat points; marginal valuation; strategic moves;
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-03 (All new papers)
- NEP-GTH-2009-06-03 (Game Theory)
- NEP-MIC-2009-06-03 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Burtraw, Dallas, 1992. "Strategic delegation in bargaining," Economics Letters, Elsevier, vol. 38(2), pages 181-185, February.
- Kirstein, Roland & Rickman, Neil, 2002.
""Third Party Contingency" contracts in settlement and litigation,"
CSLE Discussion Paper Series
2002-11, Saarland University, CSLE - Center for the Study of Law and Economics.
- Roland Kirstein & Neil Rickman, 2004. ""Third Party Contingency" Contracts in Settlement and Litigation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(4), pages 555-, December.
- Roland Kirstein & Neil Rickman, . "Third Party Contingency contracts in settlement and litigation," German Working Papers in Law and Economics 2002-1-1038, Berkeley Electronic Press.
- Kirstein, Roland & Rickman, Neil, 2003. ""Third Party Contingency" contracts in settlement and litigation," CSLE Discussion Paper Series 2003-09, Saarland University, CSLE - Center for the Study of Law and Economics.
- Kirstein, Roland & Rickman, Neil, 2002. ""Third Party Contingency" contracts in settlement and litigation," Berkeley Olin Program in Law & Economics, Working Paper Series qt6vn9877z, Berkeley Olin Program in Law & Economics.
- Steven D. Levitt & Chad Syverson, 2005.
"Market Distortions when Agents are Better Informed: The Value of Information in Real Estate Transactions,"
NBER Working Papers
11053, National Bureau of Economic Research, Inc.
- Steven D. Levitt & Chad Syverson, 2008. "Market Distortions When Agents Are Better Informed: The Value of Information in Real Estate Transactions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 599-611, November.
- Binmore, Ken & Shaked, Avner & Sutton, John, 1989. "An Outside Option Experiment," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 753-70, November.
- Jones, Stephen R. G., 1989. "Have your lawyer call my lawyer : Bilateral delegation in bargaining situations," Journal of Economic Behavior & Organization, Elsevier, vol. 11(2), pages 159-174, March.
- Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
- Kirstein, Roland & Gerhard, Hans, 2005.
"The "Rainmaker's Dilemma": Bad Debt Loss Insurance in Settlement and Litigation,"
CSLE Discussion Paper Series
2005-02, Saarland University, CSLE - Center for the Study of Law and Economics.
- Roland Kirstein & Annette Kirstein & Hans Gerhard, 2008. "The “Rainmaker’s Dilemma:” Bad Debt Loss Insurance in Settlement and Litigation," FEMM Working Papers 08002, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
661465000000000387, David K. Levine.
- Katz, Michael L., 1991.
"Game-Playing Agents: Unobservable Contracts as Precommitments,"
Department of Economics, Working Paper Series
qt79b870w0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Michael L. Katz, 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 307-328, Autumn.
- Michael L. Katz., 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," Economics Working Papers 91-172, University of California at Berkeley.
- Helmut Bester & J?sef S?ovics, .
"Delegated Bargaining And Renegotiation,"
UFAE and IAE Working Papers
440.99, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Hongbin Cai & Walter Cont, 2004.
"Agency Problems and Commitment in Delegated Bargaining,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 13(4), pages 703-729, December.
- Hongbin Cai & Walter Cont, 2000. "Agency Problems and Commitment in Delegated Bargaining," Econometric Society World Congress 2000 Contributed Papers 1270, Econometric Society.
- Binmore, K.G. & Shaked, A. & Sutton, J., 1989. "An outside option experiment," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
- Roland Kirstein & Matthias Peiss, 2013. "Quantitative Machtkonzepte in der Ökonomik," FEMM Working Papers 130004, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guido Henkel).
If references are entirely missing, you can add them using this form.