Björn Segendorff: Dept. of Economics, Stockholm School of Economics, Postal: P.O. Box 6501, S-113 83 Stockholm, Sweden
Abstract: Two principals simultaneously appoint one agent each and decide how much power to give to their agents. The agents' task is to bargain over the provision of a public good. Power here means the right to decide the own side's provision if negotiations break down. In equilibrium the principals delegate to agents that are relatively disinterested in the public good and give them all power. The fact that both principals have the possibility to delegate is, in equilibrium, harmful to at least one of them. The equilibrium may even be Pareto dominated by the outcome under autarchy.
20 pages, August 31, 1998
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