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Mediation and strategic delay in bargaining and markets

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  • Back, Kerry
  • Barton, Paul

Abstract

Mediator proposals can accelerate agreement and increase welfare even if the mediator is entirely uninformed. We demonstrate this by adding random mediation to the Cramton (1992) bargaining model. Mediation increases welfare by pooling types, which reduces signaling costs. Size discovery mechanisms in financial markets, in which traders can trade at a frozen price, are analogous to mediator proposals and may increase gains from trade in markets in which traders are reluctant to signal trading intentions by posting limit orders.

Suggested Citation

  • Back, Kerry & Barton, Paul, 2022. "Mediation and strategic delay in bargaining and markets," Journal of Economic Dynamics and Control, Elsevier, vol. 141(C).
    • Handle: RePEc:eee:dyncon:v:141:y:2022:i:c:s0165188922000811
    DOI: 10.1016/j.jedc.2022.104377
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    References listed on IDEAS

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