Delegation Games with Full Commitment

Paolo Balduzzi ()
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Paolo Balduzzi: Edinburgh School of Economics and Department of Economics, University of Milan-Bicocca

No 70, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: In this paper we present and solve some bargaining games a la Rubinstein, where the subjects can delegate the negotiating process to agents. Delegation is a possible commitment tactic. Its aim is to provide the delegating party with a higher bargaining power. When both the parties delegate, uncertainty arises about the final distribution of the payoffs and multiple equilibria are possible. The seller loses his usual first mover's advantage. When we allow for delegation costs, the range of multiple equilibria shrinks. The final outcome of the game may be now inefficient for the principals and a prisoners' dilemma may arise

JEL-codes: C72 C78 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2004-04, Revised 2004-04
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