DP9910 The Politics of Compromise

Author(s): Alessandro Bonatti, Heikki Rantakari
Publication Date: March 2014
Keyword(s): bargaining, compromise, conflict, consensus, deadlines, free-riding
JEL(s): C72, D71, D83
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9910

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.