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Delegation Games with Full Commitment

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Author Info
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
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File Function: First version, 2004
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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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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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  1. Sutton, John, 1986. "Non-cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Blackwell Publishing, vol. 53(5), pages 709-24, October. [Downloadable!] (restricted)
  2. Muthoo, Abhinay, 1996. "A Bargaining Model Based on the Commitment Tactic," Journal of Economic Theory, Elsevier, vol. 69(1), pages 134-152, April. [Downloadable!] (restricted)
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  3. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January. [Downloadable!] (restricted)
  4. Fershtman, Chaim & Judd, Kenneth L & Kalai, Ehud, 1991. "Observable Contracts: Strategic Delegation and Cooperation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 551-59, August. [Downloadable!] (restricted)
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  5. Crawford, Vincent P, 1982. "A Theory of Disagreement in Bargaining," Econometrica, Econometric Society, vol. 50(3), pages 607-37, May. [Downloadable!] (restricted)
  6. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
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  8. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen. [Downloadable!] (restricted)
  9. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April. [Downloadable!] (restricted)
  10. 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. [Downloadable!] (restricted)
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  11. Bester, Helmut & Sakovics, Jozsef, 2001. "Delegated bargaining and renegotiation," Journal of Economic Behavior & Organization, Elsevier, vol. 45(4), pages 459-473, August. [Downloadable!] (restricted)
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  12. 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.
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  13. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December. [Downloadable!] (restricted)
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  14. Corts, Kenneth S. & Neher, Darwin V., 2003. "Credible delegation," European Economic Review, Elsevier, vol. 47(3), pages 395-407, June. [Downloadable!] (restricted)
  15. Burtraw, Dallas, 1992. "Strategic delegation in bargaining," Economics Letters, Elsevier, vol. 38(2), pages 181-185, February. [Downloadable!] (restricted)
  16. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics. [Downloadable!]
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