Complexity and Efficiency in Repeated Games and Negotiation

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Complexity and Efficiency in Repeated Games and Negotiation

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Lee, J.
Sabourian, H.

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Abstract

This paper considers the ‘negotiation game’ (Busch and Wen [4]) which combines the features of two-person alternating offers and repeated games. Despite the forces of bargaining, the negotiation game in general admits a large number of equilibria, some of which involve delay in agreement and inefficiency. In order to isolate equilibria in this game, we explicitly consider the complexity of implementing a strategy, introduced in the literature on repeated games played by automata. It turns out that when the players have a preference for less complex strategies (even at the margin) only efficient equilibria survive. Thus, complexity and bargaining in tandem may offer an explanation for co-operation in repeated games.

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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0419.

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Length: 53
Date of creation: Mar 2004
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Handle: RePEc:cam:camdae:0419

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

This paper has been announced in the following NEP Reports:

NEP-ALL-2004-03-22 (All new papers)
NEP-DEV-2004-03-22 (Development)

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Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401.
Other versions:
- Martin J Osborne & Ariel Rubinstein, 2009. "A Course in Game Theory," Levine's Bibliography 814577000000000225, UCLA Department of Economics. [Downloadable!]
Douglas Gale & Hamid Sabourian, 2005. "Complexity and Competition," Econometrica, Econometric Society, vol. 73(3), pages 739-769, 05. [Downloadable!] (restricted)
Busch, Lutz-Alexander & Wen, Quan, 1995. "Perfect Equilibria in Negotiation Model," Econometrica, Econometric Society, vol. 63(3), pages 545-65, May. [Downloadable!] (restricted)
Other versions:
- Busch, L-A. & Wen, Q., 1991. "Perfect Equilibria in a Negotiation Model," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9108, University of Western Ontario, The Centre for the Study of International Economic Relations.
Gale, D. & Sabourian, H., 2003. "Complexity and Competition, Part I: Sequential Matching," Cambridge Working Papers in Economics 0345, Faculty of Economics, University of Cambridge. [Downloadable!]
Other versions:
- Douglas Gale & Hamid Sabourian, 2003. "Complexity and Competition, Part I: Sequential Matching," Levine's Bibliography 666156000000000199, UCLA Department of Economics. [Downloadable!]
Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April. [Downloadable!] (restricted)
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Piccione, Michele, 1992. "Finite automata equilibria with discounting," Journal of Economic Theory, Elsevier, vol. 56(1), pages 180-193, February. [Downloadable!] (restricted)
Sabourian, Hamid, 2004. "Bargaining and markets: complexity and the competitive outcome," Journal of Economic Theory, Elsevier, vol. 116(2), pages 189-228, June. [Downloadable!] (restricted)
Piccione Michele & Rubinstein Ariel, 1993. "Finite Automata Play a Repeated Extensive Game," Journal of Economic Theory, Elsevier, vol. 61(1), pages 160-168, October. [Downloadable!] (restricted)
Other versions:
- Robinstein, A. & Piccione, M., 1992. "Finite Automata Play A Repeated Extensive Game," UBC Departmental Archives 92-08, UBC Department of Economics.
Kalai, Ehud & Stanford, William, 1988. "Finite Rationality and Interpersonal Complexity in Repeated Games," Econometrica, Econometric Society, vol. 56(2), pages 397-410, March. [Downloadable!] (restricted)
Other versions:
- Ehud Kalai & William Stanford, 1986. "Finite Rationality and Interpersonal Complexity in Repeated Games," Discussion Papers 679, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
Fernandez, Raquel & Glazer, Jacob, 1991. "Striking for a Bargain between Two Completely Informed Agents," American Economic Review, American Economic Association, vol. 81(1), pages 240-52, March. [Downloadable!] (restricted)
Other versions:
- Raquel Fernandez & Jacob Glazer, 1989. "Striking for a Bargain Between Two Completely Informed Agents," NBER Working Papers 3108, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Binmore, Ken & Piccione, Michele & Samuelson, Larry, 1998. "Evolutionary Stability in Alternating-Offers Bargaining Games," Journal of Economic Theory, Elsevier, vol. 80(2), pages 257-291, June. [Downloadable!] (restricted)
Other versions:
- Ken Binmore & Michele Piccione & Larry Samuelson, . "Evolutionary Stability in Alternating-Offers Bargaining Games," ELSE working papers 041, ESRC Centre on Economics Learning and Social Evolution.
- Ken Binmore & Michele Piccione & Larry Samuelson, . "Evolutionary Stability in Alternatin-Offers Bargaining Games," ELSE working papers 039, ESRC Centre on Economics Learning and Social Evolution. [Downloadable!]
Kalyan Chatterjee & Hamid Sabourian, 2000. "Multiperson Bargaining and Strategic Complexity," Econometrica, Econometric Society, vol. 68(6), pages 1491-1510, November.
Other versions:
- Kalyan Chatterjee & Hamid Sabourian, 1998. "Multiperson Bargaining and Strategic Complexity," CRIEFF Discussion Papers 9808, Centre for Research into Industry, Enterprise, Finance and the Firm.
- Chatterjee, K. & Sabourian, H., 1997. "Multiperson Bargaining and Strategic Complexity," Cambridge Working Papers in Economics 9733, Faculty of Economics, University of Cambridge.
Piccione, M. & Rubinstein, A., 1992. "Finite Automata Play A Repeated Extensive Game," Papers 5-92, Tel Aviv.
Haller, Hans & Holden, Steinar, 1990. "A letter to the editor on wage bargaining," Journal of Economic Theory, Elsevier, vol. 52(1), pages 232-236, October. [Downloadable!] (restricted)
repec:att:wimass:19963r is not listed on IDEAS
Rubinstein, Ariel, 1986. "Finite automata play the repeated prisoner's dilemma," Journal of Economic Theory, Elsevier, vol. 39(1), pages 83-96, June. [Downloadable!] (restricted)

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