Delegated Bargaining and Renegotiation

Helmut Bester and József Sákovics

Departmental Working Papers

Abstract: This paper examines the commitment effect of delegated bargaining when renegotiation of the delegation contract cannot be ruled out. We consider a seller who can either bargain face-to-face with a prospective buyer or hire an intermediary to bargain on her behalf. The intermediary is able to interrupt his negotiation with the buyer to renegotiate the delegation contract. In this model, the time cost of renegotiation prevents a full elimination of the commitment effect of delegation. In particular, there are always gains from delegation when the players are sufficiently patient. An extension of the basic model to a search market shows that the gains from delegation are negatively related to the efficiency of search.

Keywords: bargaining; commitment; delegation; renegotiation; search (search for similar items in EconPapers)
JEL-codes: C72 C78 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-reg
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Related works:
Journal Article: Delegated bargaining and renegotiation (2001)
Working Paper: Delegated Bargaining and Renegotiation (2000)
Working Paper: DELEGATED BARGAINING AND RENEGOTIATION
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Persistent link: https://EconPapers.repec.org/RePEc:bef:lsbest:007

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