Collaborative Research: Veto Bargaining: Delegation and Non-Coasian Dynamics

Project: Research project

Project Details


Collaborative Research: Veto Bargaining: Delegation and Non-Coasian Dynamics Collaborative Research: Veto Bargaining: Delegation and Non-Coasian Dynamics Veto Bargaining: Delegation and Non-Coasian Dynamics Project Summary This proposal consists of two broad lines of theoretical research on the topic of veto bargaining. Veto bargaining concerns situations in which one agent or group can make proposals but another must approve them. Applications abound: legislatures (e.g., U.S. Congress) propose bills that executives (e.g., the President) can veto; judicial rulings of lower court can be overturned by higher courts; CEOs or Boards sometimes need shareholders to sign off on certain decisions; and search committees put forward candidates but the decision of whether to hire rests elsewhere. The proposal studies a framework in which there are effectively two agents: Proposer, who makes proposals, and Vetoer, who decides whether to accept or maintain a status quo. Bargaining is over a spatial dimension of actions or policies; i.e., the agents have single-peaked preferences. Crucially, Vetoers preferences are her private information. Intellectual Merit The first part of the project takes a mechanism design approach to identify Proposer-optimal outcomes when Proposer has full commitment. This approach is useful both normatively and positively. A connection is made to optimal delegation. Among other things, the results will show that under reasonable conditions incomplete information can dramatically corrode Proposers bargaining power, while still resulting in efficient outcomes. This contrasts simultaneously with the takeaways from prior work both from veto bargaining with complete information (when Proposer extracts significant surplus) and other mechanism design contexts (in which inefficiency typically obtains because of private information). The second part of the research project studies a dynamic framework in which Proposer has limited commitment. He cannot commit to not coming back to Vetoer with a proposal in the next period should the current proposal be rejected. We use the results from the first part to understand how Proposer is affected by limited commitment. A familiar intuition when players are patient is that of Coasian dynamics: regardless of the commitment solution, Proposers lack of commitment should erode her bargaining power and lead to Vetoer getting her ideal outcome, perhaps modulo some minimum outside option payoff to Proposer. We will show that this intuition fails in our environment, owing to single-peaked preferences. In particular, Proposer might obtain her commitment payoff. The non-Coasian dynamics appear to be novel. Broader Impact The projects herein should have broad impacts on our theoretical and practical understanding of veto bargaining. Given the centrality of bargaining in economic theory and applications, the research has the potential to provide transferable insights. The relevance of veto bargaining in the political sphere means that the value of menus/screening identified here could have normative and perhaps even prescriptive benefits in an important applied domain. 1
Effective start/end date8/1/207/31/23


  • National Science Foundation (NSF): $208,911.00


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