Three essays on bargaining over decision rights and contests

This dissertation consists of three chapters where the first two chapters study models of bargaining over decision rights and the third chapter studies a model of contests.;In the first chapter, "Selling Authority," I consider bargaining over decision-making authority in which an informed but self-interested agent makes a price offer to buy decision-rights to an uninformed principal who then decides either to accept or to reject the offer. No matter how large the difference between parties' preferences, there exists a continuum of perfect Bayesian equilibria, each of which yields an ex-post efficient action for any realization of the state. In these equilibria, delegation takes place with probability one and no information is transmitted, even though the informed agent's price offers could have been used as a signaling device. However, there exists an infinite sequence of informative equilibria that approximates ex-post efficiency in the limit.;The second chapter, "Communication in Bargaining over Decision Right," develops a model of bargaining over decision-rights between an uninformed principal and an informed but self-interested agent. The uninformed principal makes a price offer to the agent who then decides either to accept or to reject the offer. Contrary to the prediction the Coase Theorem provides, actions induced in the unique perfect Bayesian equilibrium do not always satisfy ex-post efficiency. Once we introduce explicit communication into the model, however, there exists a truth-telling perfect Bayesian equilibrium, even when the conflict of interest is arbitrarily large. The truth-telling equilibrium outcome is ex-ante Pareto superior to that of several dispute-resolution schemes studied in the framework of Crawford and Sobel (1982) and Holmstrom (1977).;The third chapter, "Contests with a stochastic number of players," studies the Tullock's (1980) n-player contest where each player has an independent probability 0 < p ≤ 1 to participate. A unique symmetric equilibrium is found for any n and p and its properties are analyzed. We show that for a fixed n > 2 the individual equilibrium spending is non-monotonic whereas the total equilibrium spending is monotonically increasing in p and n . We also show that the ex-post over-dissipation is a natural feature of the equilibrium.;Keywords: Decision-rights, Bargaining, Cheap Talk, Information Transmission, Contests, Rent-seeking.