IDEAS home Printed from https://ideas.repec.org/p/kob/dpaper/dp2025-20.html
   My bibliography  Save this paper

Bilateral Bargaining with a Biased Intermediary

Author

Listed:
  • Yusuke Yamaguchi

    (Institute of Social and Economic Research, The University of Osaka, JAPAN, Toulouse School of Economics, FRANCE, and Research Institute for Economics & Business Administration (RIEB), Kobe University, JAPAN)

Abstract

Bilateral bargaining is often facilitated by an intermediary. In many settings, however, the intermediary shares interests with one of the negotiating parties and lacks both commitment and enforcement power. This paper examines how such a biased intermediary affects bargaining outcomes. I consider a stylized bilateral trade framework and compare two bargaining games: a seller-offer bargaining game, in which the seller proposes a price, and a mediated bargaining game, in which the intermediary proposes a price and traders pay her commissions. By focusing on the set of communication equilibria in both games, I characterize the outcomes achievable when players are allowed general preplay and intraplay communication. I show that if the intermediary's bias is sufficiently small, the mediated bargaining game can yield a higher expected social surplus than the seller-offer bargaining game in the second-best scenario. This result provides a rationale for the widespread use of biased intermediaries in practice, even when their bias is common knowledge.

Suggested Citation

  • Yusuke Yamaguchi, 2025. "Bilateral Bargaining with a Biased Intermediary," Discussion Paper Series DP2025-20, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2025-20
    as

    Download full text from publisher

    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2025-20.pdf
    File Function: First version, 2025
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Bargaining; Intermediary; Bias; Communication equilibrium;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kob:dpaper:dp2025-20. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University (email available below). General contact details of provider: https://edirc.repec.org/data/rikobjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.