Scandinavian Working Papers in Economics
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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 107:
Delegation as at threat in bargaining

Björn Segendorff

Abstract: in a bargaining game over the provision of a public good, two principals appoint one agent each to carry out the bargaining. Each agent has preferences over the outcome. Two institutional set-ups are studied, each with a different level of authority given to the agents. By authority is here meant the right to decide the own side's provision if negotiations break down. In equilibrium both principals choose agents with preferences differing from their own. The low-authority equilibrium Pareto dominates (with regard to the principals) the case of no bargaining (autarchy), but at least one of the principals is worse off compared to bargaining without delegation. The high-authority equilibrium is Pareto dominated by the low-authority equilibrium and it may even be dominated by autarchy.

Keywords: Strategic delegation; Nash bargaining solution; (follow links to similar papers)

JEL-Codes: C71; C72; (follow links to similar papers)

27 pages, March 1996

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This paper is published as:
Segendorff, Björn, (1998), 'Delegation and Threat in bargaining', Games and Economic Behavior, Vol. 23, pages 266-283

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