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A Behavioral Model of Bargaining with Endogenous Types

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Author Info
Dilip Abreu () (Princeton University)
David Pearce
Abstract

We enrich a simple two-person bargaining model by introducing "behavioral types" who concede more slowly than does the average person in the economy. The presence of behavioral types profoundly influences the choices of optimizing types. In equilibrium, concessions are calculated to induce "reciprocity": a substantial concession by player i is followed by a period in which j is much more likely to make a concession than usual. This favors concessions by i that are neither very small nor large enough to end the bargaining immediately. A key difference from the traditional method of perturbing a game is that the actions of our behavioral types are not specified in absolute terms, but relative to the norm in the population. Thus their behavior is determined endogenously as part of a social equilibrium.

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Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 1446.

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Length: 59 pages
Date of creation: Nov 2003
Date of revision:
Handle: RePEc:cwl:cwldpp:1446

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Related research
Keywords: Bargaining; reputation; endogenous type;

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Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Hendricks, Ken & Weiss, Andrew & Wilson, Charles A, 1988. "The War of Attrition in Continuous Time with Complete Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(4), pages 663-80, November. [Downloadable!] (restricted)
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  2. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August. [Downloadable!] (restricted)
    Other versions:
  3. D. Abreu & F. Gul, 1998. "Bargaining and Reputation," Princeton Economic Theory Papers 00s9, Economics Department, Princeton University.
    Other versions:
  4. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March. [Downloadable!] (restricted)
  5. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January. [Downloadable!] (restricted)
  6. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August. [Downloadable!] (restricted)
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  7. Eric Maskin & Jean Tirole, 1997. "Markov Perfect Equilibrium, I: Observable Actions," Harvard Institute of Economic Research Working Papers 1799, Harvard - Institute of Economic Research.
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  8. Drew Fudenberg & David Kreps & David K. Levine, 1988. "On the Robustness of Equilibrium Refinements," Levine's Working Paper Archive 227, David K. Levine. [Downloadable!]
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  9. Paul Klemperer & Jeremy Bulow, 1999. "The Generalized War of Attrition," Game Theory and Information 9901004, EconWPA. [Downloadable!]
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  10. Lawrence M. Ausubel & Peter Cramton & Raymond J. Deneckere, 2002. "Bargaining with Incomplete Information," Papers of Peter Cramton 02barg, University of Maryland, Department of Economics - Peter Cramton, revised 12 Mar 2001. [Downloadable!]
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  11. Lones Smith & Ennio Stacchetti, 2002. "Aspirational Bargaining," Game Theory and Information 0201003, EconWPA. [Downloadable!]
  12. Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine. [Downloadable!]
  13. Michael D. Whinston, 1988. "Exit with Multiplant Firms," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 568-588, Winter. [Downloadable!] (restricted)
  14. Chatterjee, Kalyan & Samuelson, Larry, 1987. "Bargaining with Two-Sided Incomplete Information: An Infinite Horizon Model with Alternating Offers," Review of Economic Studies, Blackwell Publishing, vol. 54(2), pages 175-92, April. [Downloadable!] (restricted)
  15. Cho, In-Koo, 1990. "Uncertainty and Delay in Bargaining," Review of Economic Studies, Blackwell Publishing, vol. 57(4), pages 575-95, October. [Downloadable!] (restricted)
  16. Gul, Faruk & Sonnenschein, Hugo, 1988. "On Delay in Bargaining with One-Sided Uncertainty," Econometrica, Econometric Society, vol. 56(3), pages 601-11, May. [Downloadable!] (restricted)
  17. Fudenberg, Drew & Kreps, David M, 1987. "Reputation in the Simultaneous Play of Multiple Opponents," Review of Economic Studies, Blackwell Publishing, vol. 54(4), pages 541-68, October. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. D. Abreu & D. Pearce, . "Bargaining, Reputation and Equilibrium Selection in Repeated Games," Princeton Economic Theory Papers 00f2, Economics Department, Princeton University.
  2. Lones Smith & Ennio Stacchetti, 2002. "Aspirational Bargaining," Game Theory and Information 0201003, EconWPA. [Downloadable!]
  3. Susan Athey & Kyle Bagwell, 2004. "Collusion with persistent cost shocks," Discussion Papers 0405-07, Columbia University, Department of Economics. [Downloadable!]
    Other versions:
  4. Dilip Abreu & David G. Pearce, 2006. "Reputational Wars of Attrition with Complex Bargaining Postures," Levine's Working Paper Archive 122247000000001218, David K. Levine. [Downloadable!]
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