DELEGATION AND THREAT IN BARGAINING

Two principals (''nations'') appoint one agent each to bargain over th e provision of a public good. Two institutional set-ups are studied, e ach with a different level of authority given to the agents. Here auth ority means the right to decide the own side's provision if negotiatio ns break down. In equilibrium the principals choose agents with prefer ences differing from their own. The low-authority equilibrium Pareto d ominates (with regard to the principals) the case of the principals de ciding on the provisions simultaneously (autarchy). The high-authority equilibrium is Pareto dominated by the low-authority equilibrium and it may even be dominated by autarchy. (C) 1998 Academic Press.