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Nash meets Rubinstein in final-offer arbitration

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  • Yildiz, Muhamet

Abstract

I consider a final-offer arbitration model in which the offers are submitted sequentially, the parties are allowed to accept offers, and the arbitrator maximizes Nash's social welfare function. I show that backwards induction in this three-period model leads to the subgame-perfect equilibrium outcome of Rubinstein's infinite-horizon alternating-offer bargaining game.

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File URL: http://www.sciencedirect.com/science/article/B6V84-51JXFG5-1/2/db9aba1363d9fd1c4f491da2d959f42a
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 110 (2011)
Issue (Month): 3 (March)
Pages: 226-230

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Handle: RePEc:eee:ecolet:v:110:y:2011:i:3:p:226-230

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Nash bargaining Rubinstein Bargaining Final-offer arbitration;

References

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  1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  2. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  3. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
  4. Crawford, Vincent P, 1979. "On Compulsory-Arbitration Schemes," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 131-59, February.
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Cited by:
  1. Rong, Kang, 2012. "Alternating-offer games with final-offer arbitration," Games and Economic Behavior, Elsevier, vol. 76(2), pages 596-610.

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