 Communication in bargaining over decision rightsGames and Economic Behavior, 2014, vol. 85, issue C, 159-179 Abstract: This paper develops a model of bargaining over decision rights between an uninformed principal and an informed but self-interested agent. We introduce two different bargaining mechanisms: tacit and explicit bargaining. In tacit bargaining, an uninformed principal makes a take-it-or-leave-it price offer to the agent, who then decides whether to accept or reject the offer. In the equilibrium of the game, the principal inefficiently screens out some agent types so that the agent's private information cannot be fully utilized when the decision is made. In explicit bargaining in which parties can communicate explicitly via cheap talk before tacit bargaining, however, an equilibrium with no such inefficient screening exists even when the conflict of interest is arbitrarily large. We also follow a mechanism design approach, showing that under certain conditions, explicit bargaining is an optimal bargaining mechanism that maximizes the joint surplus of the parties. Keywords: Decision rights; Delegation; Monetary transfer; Cheap talk (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:85:y:2014:i:c:p:159-179 DOI: 10.1016/j.geb.2014.02.002 Access Statistics for this article Games and Economic Behavior is currently edited by E. Kalai More articles in Games and Economic Behavior from Elsevier |
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