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Delegation Games with Full Commitment

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  • Paolo Balduzzi

    () (Edinburgh School of Economics and Department of Economics, University of Milan-Bicocca)

Abstract

In this paper we present and solve some bargaining games a la Rubinstein, where the subjects can delegate the negotiating process to agents. Delegation is a possible commitment tactic. Its aim is to provide the delegating party with a higher bargaining power. When both the parties delegate, uncertainty arises about the final distribution of the payoffs and multiple equilibria are possible. The seller loses his usual first mover's advantage. When we allow for delegation costs, the range of multiple equilibria shrinks. The final outcome of the game may be now inefficient for the principals and a prisoners' dilemma may arise

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper70.pdf
File Function: First version, 2004
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Bibliographic Info

Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 70.

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Length: 36 pages
Date of creation: Apr 2004
Date of revision: Apr 2004
Handle: RePEc:mib:wpaper:70

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  1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  2. Polo, Michele & Tedeschi, Piero, 2000. "Delegation games and side-contracting," Research in Economics, Elsevier, vol. 54(1), pages 101-116, March.
  3. Chaim Fershtman & Kenneth L Judd, 1984. "Equilibrium Incentives in Oligopoly," Discussion Papers 642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
  5. Abhinay Muthoo, . "A Bargaining Model Based on the Commitment Tactic," Economics Discussion Papers 420, University of Essex, Department of Economics.
  6. Chaim Fershtman & Kenneth L. Judd & Ehud Kalai, 1990. "Observable Contracts: Strategic Delegation and Cooperation," Discussion Papers 879, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Fershtman, C. & Kalai, E., 1993. "Unobserved Delegation," Papers 10-93, Tel Aviv - the Sackler Institute of Economic Studies.
    • Fershtman, Chaim & Kalai, Ehud, 1997. "Unobserved Delegation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 763-74, November.
  8. Sutton, John, 1986. "Non-cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 709-24, October.
  9. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  10. Bester, Helmut & Sakovics, Jozsef, 2001. "Delegated bargaining and renegotiation," Journal of Economic Behavior & Organization, Elsevier, vol. 45(4), pages 459-473, August.
  11. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
  12. Michael L. Katz., 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," Economics Working Papers 91-172, University of California at Berkeley.
  13. Schotter, Andrew & Zheng, Wei & Snyder, Blaine, 2000. "Bargaining Through Agents: An Experimental Study of Delegation and Commitment," Games and Economic Behavior, Elsevier, vol. 30(2), pages 248-292, February.
  14. Crawford, Vincent P, 1982. "A Theory of Disagreement in Bargaining," Econometrica, Econometric Society, vol. 50(3), pages 607-37, May.
  15. 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.
  16. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
  17. Corts, Kenneth S. & Neher, Darwin V., 2003. "Credible delegation," European Economic Review, Elsevier, vol. 47(3), pages 395-407, June.
  18. Burtraw, Dallas, 1992. "Strategic delegation in bargaining," Economics Letters, Elsevier, vol. 38(2), pages 181-185, February.
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