Three essays in microeconomic theory

This dissertation consists of three essays in microeconomic theory. In the first chapter I argue that in a principal-agent model with hidden information and no monetary transfers, the principal can achieve any incentive compatible outcome with very little commitment. In fact, the main function of commitment in this environment is to ensure that the principal has almost no formal control over the agent's decisions. I establish the veto-power principle: any incentive compatible outcome can be implemented through veto-based delegation.;The second chapter studies bargaining under two-sided asymmetric information. First, I demonstrate that, in contrast to the existing literature, making a take-it-or-leave-it offer is typically not the best bargaining procedure for a player. In particular, the player may be better off when he receives the ultimatum offer from his opponent than when he makes such an offer himself. Second, I find that there is an intrinsic tension between the ex-ante and the interim optimal bargaining rules. As a result of this tension, the player would like to remain ignorant at the moment of selecting these rules. Moreover, sometimes the player might be better off if his opponent chooses the bargaining rules than if he does it himself.;In the third chapter, I attempt to understand the reasons for a specific inefficiency in organizations: excessive involvement of the management into the affairs of the subordinates. I present a model in which the supervisor may "fail to delegate" making decisions to the subordinate which will cause inefficiency losses due to the high opportunity cost of the supervisor's time. In my model, the supervisor and the subordinate do not have a conflict of preferences. The inefficiency occurs because the supervisor's intervention into the affairs of the employee removes incentives for the latter to exercise any initiative; this, in turn, makes the supervisor's intervention optimal. This inefficiency persists even as the cost of exercising initiative by the subordinate becomes zero.