Folk theorems in a bargaining game with endogenous protocol

Research output: Contribution to journalArticlepeer-review

Abstract

Two players bargain to select a utility allocation in some set X⊂R+2. Bargaining takes place in infinite discrete time, where each period t is divided into two sub-periods. In the first sub-period, the players play a simultaneous-move game to determine that period’s proposer, and bargaining takes place in the second sub-period. Rejection triggers a one-period delay and move to t+ 1. For every x∈X∩R++2, there exists a cutoff δ(x) < 1 , such that if at least one player has a discount factor above δ(x) , then for every y∈ X that satisfies y≥ x there exists a subgame perfect equilibrium with immediate agreement on y. The equilibrium is supported by “dictatorial threats.” These threats can be dispensed with if X is the unit simplex and the target-vector is Pareto efficient. The results can be modified in a way that allows for arbitrarily long delays in equilibrium.

Original languageEnglish
Pages (from-to)389-399
Number of pages11
JournalTheory and Decision
Volume86
Issue number3-4
DOIs
StatePublished - 1 May 2019

Bibliographical note

Publisher Copyright:
© 2019, Springer Science+Business Media, LLC, part of Springer Nature.

Keywords

  • Bargaining
  • Endogenous protocol
  • Folk theorems

ASJC Scopus subject areas

  • Decision Sciences (all)
  • Developmental and Educational Psychology
  • Arts and Humanities (miscellaneous)
  • Applied Psychology
  • Social Sciences (all)
  • Economics, Econometrics and Finance (all)
  • Computer Science Applications

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