This paper examines how domestic political constraints shape the strategic use of sanctions and rewards in international bargaining under asymmetric information. I develop a sequential game in which a sender-country policymaker, privately informed about its sanctioning cost, seeks a policy concession from a target government by offering a reward while simultaneously threatening sanctions.
Without domestic constraints, signalling frictions prevent credible rewards, all offers are rejected, and sanctions arise as the only possible equilibria. By contrast, when a domestic agent can condition the policymaker's reelection on negotiated outcomes, the policymaker’s office rents and self-interest serve as a commitment device: pooling agreement equilibria become sustainable and inefficient bargaining breakdowns are avoided.
The analysis shows that office-seeking motives—typically viewed as distortions—can enhance welfare by counteracting informational frictions. An extension with heterogeneous citizens demonstrates that strategic delegation to “weaker” representatives, who face higher sanction costs, increases the credibility of transfers and facilitates cooperation.
We develop a dynamic model of legislative bargaining with an infinite horizon, private and evolving preferences, a highly dimensional policy space, and an endogenous status quo. We show that the absence of both formal commitment and quasilinear preferences does not limit the set of policy agreements that legislators can sustain in the long run. We also demonstrate the important implications of this result for the vote trading paradox, the Tullock puzzle of vote buying, and agenda manipulation under incomplete information.
I analyze a principal’s choice between full delegation and veto-based delegation in a setting characterized by extreme polarization of preferences and asymmetric information between an uninformed principal and an informed agent. Under full delegation, the agent always selects the most extreme feasible reform in the direction of her preferred policy. By contrast, veto-based delegation collapses into complete gridlock: all proposals are rejected in equilibrium and the status quo persists. The principal therefore faces a fundamental trade-off: veto power provides insurance against harmful reforms, but at the cost of foregone policy change.