Quan Wen (Department of Economics, Yokohama National University, Yokohama 240-8501 Japan) Taiji Furusawa (Department of Economics, Yokohama National University, Yokohama 240-8501 Japan)
Abstract
Negotiation games in which two players engage in disagreement games to determine their payoffs during the bargaining generally admit multiple perfect equilibrium outcomes, including inefficient ones. This paper shows that if the two players cannot change their disagreement actions as frequent as they bargain, then the set of perfect equilibrium payoffs shrinks. As disagreement actions become completely inflexible relative to the bargaining frequency, the set of equilibrium payoffs shrinks to Nash's (1953) bargaining solution with strategic threat.
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