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On the co-evolution of investment and bargaining norms

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  • L. Bagnoli
  • G. Negroni

Abstract

Two parties bargaining over a pie whose size is determined by the investment decisions of both. The bargaining rule is sensitive to the investment behavior. If a symmetric investments profile is observed, bargaining proceeds according to the Nash Demand Game; otherwise bargaining proceeds according to the Ultimatum Game. We are interested in the evolutionary emergence of both an efficient investment norm and a bargaining norm. Under some conditions we prove that these norms co-evolve; when this happens they support the efficient investment and the egalitarian distribution of the surplus. In addition, when surplus requires that at least one agent invests, then either both norms co-evolve or no norm evolves.

Suggested Citation

  • L. Bagnoli & G. Negroni, 2010. "On the co-evolution of investment and bargaining norms," Working Papers 710, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:710
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    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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