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A Dynamic Reinterpretation of Nash Bargaining With Endogenous Threats

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  • Dilip Abreu
  • David Pearce

Abstract

This paper concerns the two‐stage game introduced in Nash (1953). It formalizes a suggestion made (but not pursued) by Nash regarding equilibrium selection in that game, and hence offers an arguably more solid foundation for the “Nash bargaining with endogenous threats” solution. Analogous reasoning is then applied to an infinite horizon game to provide equilibrium selection in two‐person repeated games with contracts. In this setting, issues about enforcement of threats are much less problematic than in Nash's static setting. The analysis can be extended to stochastic games with contracts.

Suggested Citation

  • Dilip Abreu & David Pearce, 2015. "A Dynamic Reinterpretation of Nash Bargaining With Endogenous Threats," Econometrica, Econometric Society, vol. 83(4), pages 1641-1655, July.
    • Handle: RePEc:wly:emetrp:v:83:y:2015:i:4:p:1641-1655
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    Cited by:

    1. Harstad, Bård, 2023. "Pledge-and-review bargaining," Journal of Economic Theory, Elsevier, vol. 207(C).
    2. Roberto Serrano, 2020. "Sixty-Seven Years of the Nash Program: Time for Retirement?," Working Papers 2020-20, Brown University, Department of Economics.
    3. Jyh‐Bang Jou & Tan (Charlene) Lee, 2021. "Uncertainty, hiring and firing costs, and the determinants of profit‐sharing rules," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(1), pages 185-197, January.
    4. Emin Karagözoğlu & Shiran Rachmilevitch, 2018. "Implementing egalitarianism in a class of Nash demand games," Theory and Decision, Springer, vol. 85(3), pages 495-508, October.
    5. Emin Karagözoğlu & Kerim Keskin & Çağrı Sağlam, 2023. "(In)efficiency and equitability of equilibrium outcomes in a family of bargaining games," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(1), pages 175-193, March.
    6. Costa, Carlos Eugênio da & Lima, Lucas Alves Estevam de, 2019. "Mechanism design and the collective approach to household behavior," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 808, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    7. Anna Sanktjohanser, 2020. "Optimally Stubborn," Cowles Foundation Discussion Papers 2255, Cowles Foundation for Research in Economics, Yale University.
    8. William Thomson, 2022. "On the axiomatic theory of bargaining: a survey of recent results," Review of Economic Design, Springer;Society for Economic Design, vol. 26(4), pages 491-542, December.
    9. Shiran Rachmilevitch, 2022. "Reasonable Nash demand games," Theory and Decision, Springer, vol. 93(2), pages 319-330, September.
    10. Roberto Serrano, 2021. "Sixty-seven years of the Nash program: time for retirement?," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 12(1), pages 35-48, March.
    11. Nejat Anbarci & Kang Rong & Jaideep Roy, 2019. "Random-settlement arbitration and the generalized Nash solution: one-shot and infinite-horizon cases," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 68(1), pages 21-52, July.
    12. Shiran Rachmilevitch, 2020. "Rewarding moderate behavior in a dynamic Nash Demand Game," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(2), pages 639-650, June.

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