On 11th February 2019 we have Danisz Okulicz of the Universitat Autònoma de Barcelona & Barcelona Graduate School of Economics visiting us. He is going to give a seminar titled Negotiations, Expertise and Strategic Misinformation at 12:15-13:30 in room A406 in Building Q, Budapest University of Technology and Economics, Faculty of Economic and Social Sciences, Magyar tudósok körútja 2, 1117 Budapest. Sandwiches will be provided. Please register. See our Facebook event.
Abstract: I analyze the role of an expert in negotiations with asymmetric information on example of civil litigation. To avoid a costly trial a plaintiff and a defendant engage in a pre-trial negotiation. The informed defendant offers a settlement to the uniformed plaintiff, who receives a cheap-talk advice from informed attorney before taking a final decision. The result of the negotiation depends on whether the attorney or the plaintiff is a more aggressive agent. If the attorney is a more aggressive, the plaintiff follows his advice only for low settlement offers, and accepts any high offer. If the plaintiff is more aggressive, she follows her attorney recommendation only for some finite set of offers, and rejects any other offer. I study the contracts that the plaintiff and the attorney can sign before the negotiation. I find that the agents gain on misalignment of their incentives. In particular, if the attorney is sufficiently aggressive the plaintiff’s payoff under an asymmetric information may be higher than under a symmetric information.