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Bargaining with Noisy Delegation

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  • Dallas Burtraw

Abstract

Principals delegate to an agent in the context of the Nash bargaining model, but communicate instructions to their agents imperfectly. Numerical methods are used to find a unique equilibrium in the principals' strategies. Agents fail to agree with a positive probability, invoking a secondary mechanism for the resolution of disputes such as arbitration. Comparative statics are informative. The risk sensitivity of the Nash bargaining solution is mitigated but not eliminated. As uncertainty goes to zero, a stable unique limiting equilibrium is identified from the set of multiple equilibria identified in a model in which principals delegate without trembles.

Suggested Citation

  • Dallas Burtraw, 1993. "Bargaining with Noisy Delegation," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 40-57, Spring.
    • Handle: RePEc:rje:randje:v:24:y:1993:i:spring:p:40-57
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    Cited by:

    1. Arvaniti, Maria & Habla, Wolfgang, 2021. "The political economy of negotiating international carbon markets," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    2. Habla, Wolfgang & Winkler, Ralph, 2018. "Strategic delegation and international permit markets: Why linking May fail," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 244-250.
    3. Schotter, Andrew & Zheng, Wei & Snyder, Blaine, 2000. "Bargaining Through Agents: An Experimental Study of Delegation and Commitment," Games and Economic Behavior, Elsevier, vol. 30(2), pages 248-292, February.
    4. Kyung Hwan Baik, 2007. "Equilibrium Contingent Compensation in Contests with Delegation," Southern Economic Journal, John Wiley & Sons, vol. 73(4), pages 986-1002, April.
    5. Spycher, Sarah & Winkler, Ralph, 2022. "Strategic delegation in the formation of modest international environmental agreements," European Economic Review, Elsevier, vol. 141(C).
    6. Siqueira, Kevin, 2003. "International externalities, strategic interaction, and domestic politics," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 674-691, May.

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