Mediators and Mechanism Design: Why Firms Hire Consultants
This paper offers a new type of explanation for economic institutions as playing the role of mediators in the sense of Myerson (1985) to facilitate communication in contracting settings with ex ante asymmetric information and limited commitment. It derives necessary and sufficient conditions under which mediation is strictly helpful and provides a straightforward, yet general intuition for this result. As an application of our idea we explain the widely observed use of consultants during the restructure of firms.
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