Do side payments help? Collective decisions and strategic delegation

Bard Harstad

No 1452, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: I investigate when a exible bargaining agenda, where side payments are possible, facilitates cooperation in a context with strategic delegation. On the one hand, allowing side payments may be necessary when one partys participation constraint otherwise would be violated. On the other, with side payments each principal appoints a delegate that values the project less, since this increases her bargaining power. Reluctant agents, in turn, implement too few projects. I show that side payments are bad if the heterogeneity is small while the uncertainty and the typical value of the project are large. With a larger number of parties there may be a stalemate without side payments, but delegation becomes more strategic as well, and cooperation decreases in either case.

Keywords: Collective action; side transfers; bargaining agenda; strategic delegation; issue linkages (search for similar items in EconPapers)
JEL-codes: C78 D78 F53 H77 (search for similar items in EconPapers)
Date: 2007-09
New Economics Papers: this item is included in nep-cdm, nep-cse, nep-gth and nep-ppm
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Journal Article: Do Side Payments Help? Collective Decisions and Strategic Delegation (2008)
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