Inefficient Concessions and Mediation

Kristy Buzard, Ben Horne
2016 unpublished
When two parties are engaged in conflict and each distrusts the other's ability to pursue peace, concessions can be used to indicate an interest in making peace. We demonstrate that a lack of trust can prevent optimal concessions from being made, creating inefficiencies in negotiation that can reduce the possibility of peace. We use mechanism design to explore ways in which a third party mediator can act as a guarantor that promised concessions will be delivered, thereby reducing inefficiencies
more » ... and increasing the potential for peace. In this process, we open up a rationale for mediation: to remove the inefficiencies of signaling in a preliminary round of negotiations.
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