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Mediation in Situations of Conflict and Limited Commitment

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  • Mitusch, Kay
  • Strausz, Roland

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 non-binding proposals. We show that a partial rev-elation 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 non-monotonically on the degree of conflict. Our insights extend to general models of contracting with imperfect commitment.

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Bibliographic Info

Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 24.

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Date of creation: Jun 2004
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Handle: RePEc:trf:wpaper:24

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Keywords: Contracting; Non-Commitment; Revelation Principle;

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References

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  5. Forges, F., 1987. "Can sunspots replace a mediator ?," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1987045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  8. Hart, Oliver D & Tirole, Jean, 1988. "Contract Renegotiation and Coasian Dynamics," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 55(4), pages 509-40, October.
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  10. Jean-Jacques LAFFONT & Jean TIROLE, 1990. "Adverse Selection and Renegotiation in Procurement," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP), Université de Lausanne, Faculté des HEC, DEEP 9005, Université de Lausanne, Faculté des HEC, DEEP.
  11. Kay Mitusch & Roland Strausz, . "Mediators and Mechanism Design: Why Firms Hire Consultants," Papers, Departmental Working Papers 005, Departmental Working Papers.
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Citations

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Cited by:
  1. Bester, Helmut & Strausz, Roland, 2003. "Contracting with Imperfect Commitment and Noisy Communication," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University 2, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  2. Krahmer, Daniel, 2006. "Message-contingent delegation," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 60(4), pages 490-506, August.
  3. Doornik, Katherine, 2014. "A rationale for mediation and its optimal use," International Review of Law and Economics, Elsevier, Elsevier, vol. 38(C), pages 1-10.
  4. Pinghan Liang, 2010. "Transfer of Authority within Hierarchy," Levine's Working Paper Archive 661465000000000139, David K. Levine.
  5. 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.
  6. Mitusch, Kay, 2006. "Non-commitment in performance evaluation and the problem of information distortions," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 60(4), pages 507-525, August.
  7. Maria Goltsman, 2011. "Optimal information transmission in a holdup problem," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 495-526, 09.
  8. Kohei Kawamura, 2007. "Constrained Communication with Multiple Agents: Anonymity, Equal Treatment, and Public Good Provision," ESE Discussion Papers, Edinburgh School of Economics, University of Edinburgh 166, Edinburgh School of Economics, University of Edinburgh.
  9. Goltsman, Maria & Pavlov, Gregory, 2011. "How to talk to multiple audiences," Games and Economic Behavior, Elsevier, Elsevier, vol. 72(1), pages 100-122, May.

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