Delegation contracts can make or break strategic bargaining relationships.
Delegates hired to negotiate for others face challenges in balancing incentives and commitments. By analyzing one-sided bargaining scenarios, researchers found that setting a minimum price in contracts can benefit sellers by ensuring proper incentives for delegates and gaining an advantage over buyers. However, if the minimum price is too high, it can lead to failures in negotiations. The relationship between incentives and commitments depends on the delegate's actions, with bargaining efforts and marketing efforts impacting the dynamics differently. The study also explores how these findings can be applied to real-world situations like car dealerships.