Economic Theory - Claudio Mezzetti (UQ)

Title: Shuttle Diplomacy.

Abstract: In practice, mediation often operates through shuttle diplomacy: the mediator goes back and forth between parties, meeting them in a private caucus. We model shuttle diplomacy as a dynamic procedure where the mediator helps each party to gradually discover her costs and benefits of settlement, as well as to re-assess her bargaining position, while also proposing the terms of the deal and arranging temporary claim exchanges. We show that shuttle diplomacy always allows parties to achieve an ex-post efficient and equitable (perfectly fair with symmetric value distributions) final settlement. In contrast, this is not possible with a static mediation procedure.