Thursday, April 9, 2009

When the divorce comes...

Given the failure of the CPA mechanisms for arbitration-style solutions to these issues of division, outside actors might consider devising incentive mechanisms that would deliver effective resolutions to many of these issues in a timely way. There are many such mechanisms that might be contemplated.
• Dutch auction style solutions, with a pre-announced schedule of possible solutions and side-payments. On the day the auction begins, the solution presented is available for both sides to negotiate over mutually agreed solutions with the specified allocation as the initial bargaining point (That is, to split the available pie when the pie has been divided a certain way.) If consensus is reached, the negotiation is over. If negotiation is not reached in a pre-specified time, the previous deal is no longer available, and discussion moves to the next possible deal, where the overall pie is smaller. (All kinds of mechanisms may be used to create commitment, such as complex contracts that deliver funds from third parties if deals are made, or even betting possibilities on Intrade.)

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