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Mediation in Situations of Conflict and Limited Commitment

  • Kay Mitusch
  • Roland Strausz

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 nonbinding proposals. We show that a partial revelation 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 nonmonotonically on the degree of conflict. Our insights extend to general models of contracting with imperfect commitment. Copyright 2005, Oxford University Press.

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Article provided by Oxford University Press in its journal The Journal of Law, Economics, and Organization.

Volume (Year): 21 (2005)
Issue (Month): 2 (October)
Pages: 467-500

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Handle: RePEc:oup:jleorg:v:21:y:2005:i:2:p:467-500
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