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Title:Do side payments help? Collective decisions and strategic delegation PDF Logo
Authors:Harstad, Bård
Issue Date:2007
Series/Report no.:Discussion Paper, Center for Mathematical Studies in Economics and Management Science 1452
Abstract:I investigate when side payments facilitate cooperation in a context with strategic delegation. On the one hand, allowing side payments may be necessary when one party's participation constraint otherwise would be violated. On the other, with side payments each principal appoints a delegate that values the project less, because this increases her bargaining power. Reluctant agents, in turn, implement too few projects. I show that side payments are bad if the heterogeneity is small while the uncertainty and the typical value of the project are large.With a larger number of parties there may be a stalemate without side payments, but delegation becomes more strategic as well, and cooperation decreases in either case
Document Type:Working Paper
Appears in Collections:Discussion Papers, Kellogg School of Management, Northwestern University

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