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Title: The Politics of Compromise

Author(s): Alessandro Bonatti and Heikki Rantakari

Publication Date: March 2014

Keyword(s): bargaining, compromise, conflict, consensus, deadlines and free-riding

Programme Area(s): Industrial Organization

Abstract: A team must select among competing projects that differ in their payoff consequences for its members. Each agent chooses a project and exerts costly effort affecting its random completion time. When one or more projects are complete, agents bargain over which one to implement. A consensus requirement can (but need not) induce the efficient balance between compromise in project selection and equilibrium effort. Imposing deadlines for presenting counteroffers is beneficial, while delegating decision-making to an impartial third party leads agents to select extreme projects. Finally, hiring agents with opposed interests can foster both effort and compromise in project selection.

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Bibliographic Reference

Bonatti, A and Rantakari, H. 2014. 'The Politics of Compromise'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9910