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A noncooperative foundation of the competitive divisions for bads

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  • Mariotti, Marco
  • Wen, Quan

Abstract

Many economic situations involve the division of bads. We study a noncooperative game model for this type of division problem. The game resembles a standard multilateral bargaining model, but in our case, perpetual disagreement is not a feasible outcome. The driving feature of the model is that a player that makes an unacceptable proposal (causing breakdown with some probability) is made to internalize all the costs in case of breakdown. We show that as the probability of exogenous breakdown goes to zero, this game implements some competitive divisions in Markov perfect equilibria: the limit of any convergent sequence of equilibrium outcomes is a competitive division, but a competitive division may not be a limit of the equilibrium outcomes.

Suggested Citation

  • Mariotti, Marco & Wen, Quan, 2021. "A noncooperative foundation of the competitive divisions for bads," Journal of Economic Theory, Elsevier, vol. 194(C).
    • Handle: RePEc:eee:jetheo:v:194:y:2021:i:c:s0022053121000703
    DOI: 10.1016/j.jet.2021.105253
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    Cited by:

    1. Stan Cheung & Marco Mariotti & Roberto Veneziani, 2024. "The Hard Problem and the Tyranny of the Loser," Working Papers 971, Queen Mary University of London, School of Economics and Finance.

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    More about this item

    Keywords

    Competitive division; Mixed manna; Markov perfect equilibrium;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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