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Mediation in Situations of Conflict

  • Kay Mitusch

    (Free University of Berlin)

  • Roland Strausz

    (Free University of Berlin)

We study the effectiveness of mediators in situations of conflict. In a game of cheap talk a principal may employ a mediator whose task is to gather information and make non--binding proposals. We show that mediators facilitate information transmission and are helpful if and only if the likelihood of a conflict of interest is strictly positive but not too high. Mediation increases the amount of information that can be induced in equilibrium and is helpful when full information revelation is not feasible. The insights of this paper extend to general models of mechanism design with imperfect commitment of the contract designer.

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Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0361.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:0361
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  1. Drew Fudenberg & David K. Levine & Eric Maskin, 1994. "The Folk Theorem with Imperfect Public Information," Levine's Working Paper Archive 394, David K. Levine.
  2. FORGES, Françoise, . "Equilibria with communication in a job market example," CORE Discussion Papers RP -885, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. FORGES, Françoise, . "Can sunspots replace a mediator?," CORE Discussion Papers RP -825, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Forges, F., 1984. "An approach to communication equilibria," CORE Discussion Papers 1984035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  6. Roger B. Myerson, 1984. "Multistage Games with Communication," Discussion Papers 590, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Hart, Oliver D & Tirole, Jean, 1988. "Contract Renegotiation and Coasian Dynamics," Review of Economic Studies, Wiley Blackwell, vol. 55(4), pages 509-40, October.
  8. Kay Mitusch & Roland Strausz, . "Mediators and Mechanism Design: Why Firms Hire Consultants," Papers 005, Departmental Working Papers.
  9. Jean-Jacques Laffont & Jean Tirole, 1985. "The Dynamics of Incentive Contracts," Working papers 397, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Helmut Bester & Roland Strausz, . "Imperfect Commitment and the Revelation Principle," Papers 004, Departmental Working Papers.
  11. Matthews, Steven A. & Postlewaite, Andrew, 1989. "Pre-play communication in two-person sealed-bid double auctions," Journal of Economic Theory, Elsevier, vol. 48(1), pages 238-263, June.
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