Essays in the Theory of Negotiation and Governance

This thesis focuses on the effects that information has on incentives. The three papers provide and explore some results when the information is the main variable of interest, it is made endogenous, not homogeneous between actors and evolving over time in a way that is not necessarily rational. The first paper studies hold-up problems in vertical hierarchies with adverse selection showing that as the bargaining power of the worker increases, distortions coming from asymmetric information vanish. Moreover, it studies the effect of schooling and degree of heterogeneity in the workforce on the allocation of bargaining power in regulating markets. The second paper relaxes the common assumption of homogeneous beliefs in principal-agent relationships with adverse selection. In an evolutionary learning set-up, which is imitative, principals can have different beliefs about the distribution of agents’ types in the population. Convergence to a uniform belief depends on the relative size of the bias in beliefs. In addition, the set-up is a version of a stable cobweb model. Our approach offers explanations for alternating periods of oscillating and relatively steady quantity. The third paper studies how the informative content of legal policies as strict-liability and fault-based, in case of moral concerns, influences the optimal design of liability regimes. Many recent cases show that an individual found to have caused harm faces not only the possibility of a legal sanction — e.g., the damages he must pay — but also social boycott, disapproval or stigma. The paper shows that the choice of a policy depends in a complex way on the magnitude of the harm and the “moral cost”.
Keywords: Bargaining, Adverse Selection, Hold-up, Evolutionary Game Theory, Heterogeneous Beliefs, Bifurcation Theory, Boycott, Law Enforcement, Strict Liability, Negligence.