Delegated Bargaining and Renegotiation

This paper examines the commitment e ect of delegated bargaining when renegotiation of the delegation contract cannot be ruled out. We consider a seller who can either bargain face-to-face with a prospective buyer or hire an intermediary to bargain on her behalf. The intermediary is able to interrupt his negotiation with the buyer to renegotiate the delegation contract. In this model, the time cost of renegotiation prevents a full elimination of the commitment e ect of delegation. In particular, there are always gains from delegation when the players are su ciently patient. An extension of the basic model to a search market shows that the gains from delegation are negatively related to the e ciency of search.