Delegated Bargaining and Renegotiation

Helmut Bester and József Sákovics

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: We examine the commitment effect of delegated bargaining when the delegation contract is renegotiable. We consider a seller who can either bargain face-to-face with a prospective buyer or delegate bargaining to an intermediary. The intermediary is able to interrupt negotiating with the buyer to renegotiate the delegation contract. We show that the time cost of renegotiation prevents a full elimination of the commitment effect of delegation. Indeed, there are always gains from delegation when the players are sufficiently patient. An extension to a search market environment 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)
Pages: 23
Date: 2000-05
New Economics Papers: this item is included in nep-com and nep-reg
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http://www.econ.ed.ac.uk/papers/id61_esedps.pdf

Related works:
Journal Article: Delegated bargaining and renegotiation (2001)
Working Paper: DELEGATED BARGAINING AND RENEGOTIATION
Working Paper: Delegated Bargaining and Renegotiation
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Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:61

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