Research

Bargaining with Interdependent Outside Options (Job Market Paper)

I study a split of a pie bargaining problem between two agents. The types of both agents determine the value of outside options-- I refer to this as interdependent outside options. Since a direct mechanism stipulates outcomes as function of agents' types, players can update their beliefs about the other players' type upon receiving a recommended outcome. I refer to this, as information leakage. I call binding arbitration, the case when players have to stay with a recommended outcome and non-binding arbitration, when players cannot be forced to stay with an allocation. The total pie is reduced if the outcome is an outside option. Interested on efficiency, I derive a necessary and sufficient condition for first best mechanisms, which are mechanisms that assign zero probability to the outside options for every report received. The condition can be interpreted as balanced forces at conflict (outside options) and is the same for binding and non-binding arbitration. I also show a strong link between conflict and information: when there must be conflict there must be information leakage. Hence, non-binding arbitration may seem more restrictive than binding arbitration. To analyze this, I solve for the second best mechanisms with binding arbitration and find a condition under which they can be implemented under non-binding arbitration. Thus, non-binding arbitration, can be as effective as binding arbitration in terms of efficiency. I also ask whether the mentioned equivalence between binding and non-binding arbitration can break, and provide some discussion for why that can happen.

“Persuading to not be Elected: Communication and Incentives for Team Performance”

Given a set of agents, the team, one of them must be chosen to be a leader. Each agent has private information about their leadership skills. Once the leader is chosen, each member chooses a costly action and the outcome is determined jointly by the actions of all members and the skills of the leader. The team needs to define a rule to assign a leader of the team and to split the outcome. I analyze the problem from a mechanism design perspective. I am interested on mechanisms that maximize the total welfare of the team (measured as the sum of the utilities of the team members). I am also interested in analyzing the impact of particular rules in terms of welfare. In particular, I study two scenarios. First, when there are complementarities between the actions of the team members and the type of the leader. Second, when actions of the team members and the type of the leader are substitutable. I find that, with substitutable actions and leader skills, low type members do not want to persuade the rest of the team that they have high leadership skills, because if they are elected leader, the team would rest on their claimed high leadership ability and choose suboptimal actions, I refer to this as persuading to not be elected. On the other hand, with complementarities, low types could benefit from convincing the rest that they are good leaders because they can induce high effort from the rest of the team and adjust their own action according to the true type of the leader. The strategic disclosure or concealing of information of the designer of the mechanism can help the mechanism designer for choosing higher type leaders.