Delegation in Veto Bargaining

Navin Kartik, Andreas Kleiner () and Richard Van Weelden

Papers from arXiv.org

Abstract: A proposer requires the approval of a veto player to change a status quo. Preferences are single peaked. Proposer is uncertain about Vetoer's ideal point. We study Proposer's optimal mechanism without transfers. Vetoer is given a menu, or a delegation set, to choose from. The optimal delegation set balances the extent of Proposer's compromise with the risk of a veto. Under reasonable conditions, "full delegation" is optimal: Vetoer can choose any action between the status quo and Proposer's ideal action. This outcome largely nullifies Proposer's bargaining power; Vetoer frequently obtains her ideal point, and there is Pareto efficiency despite asymmetric information. More generally, we identify when "interval delegation" is optimal. Optimal interval delegation can be a Pareto improvement over cheap talk. We derive comparative statics. Vetoer receives less discretion when preferences are more likely to be aligned, by contrast to expertise-based delegation. Methodologically, our analysis handles stochastic mechanisms.

Date: 2020-06, Revised 2021-05
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (7)

Published in American Economic Review, December 2021

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Journal Article: Delegation in Veto Bargaining (2021)
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