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Delegated bargaining and renegotiation

  • Bester, Helmut
  • Sakovics, Jozsef

This paper examines the commitment effect of delegated bargaining when renegotiation of the delegation contract cannot be ruled out. We consider a seller who can either bargain face-to-face with a prospective buyer or hire an intermediary to bargain on her behalf. The intermediary is able to interrupt his negotiation with the buyer to renegotiate the delegation contract. In this model, the time cost of renegotiation prevents a full elimination of the commitment effect of delegation. In particular, there are always gains from delegation when the players are sufficiently patient. An extension of the basic model to a search market shows that the gains from delegation are negatively related to the efficiency of search.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 45 (2001)
Issue (Month): 4 (August)
Pages: 459-473

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Handle: RePEc:eee:jeborg:v:45:y:2001:i:4:p:459-473
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  1. Abhinay Muthoo, . "A Bargaining Model Based on the Commitment Tactic," Economics Discussion Papers 420, University of Essex, Department of Economics.
  2. Haller, Hans & Holden, Steinar, 1997. "Ratification Requirement and Bargaining Power," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 825-51, November.
  3. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  4. Bester, Helmut, 1994. "Price commitment in search markets," Journal of Economic Behavior & Organization, Elsevier, vol. 25(1), pages 109-120, September.
  5. 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.
  6. 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.
  7. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December.
  8. Bester, H., 1994. "A bargaining model of financial intermediation," Discussion Paper 1994-15, Tilburg University, Center for Economic Research.
  9. 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.
  10. Dewatripont, Mathias, 1988. "Commitment through Renegotiation-Proof Contracts with Third Parties," Review of Economic Studies, Wiley Blackwell, vol. 55(3), pages 377-89, July.
  11. Crawford, Vincent P, 1982. "A Theory of Disagreement in Bargaining," Econometrica, Econometric Society, vol. 50(3), pages 607-37, May.
  12. Muthoo, Abhinay, 1992. "Revocable Commitment and Sequential Bargaining," Economic Journal, Royal Economic Society, vol. 102(411), pages 378-87, March.
  13. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-50, September.
  14. Harold Houba & Wilko Bolt, 1997. "Strategic bargaining in the variable threat game," Economic Theory, Springer, vol. 11(1), pages 57-77.
  15. repec:fth:harver:1519 is not listed on IDEAS
  16. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
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