This paper characterizes modified evolutiona.rily stable strategies (MESSes) in Rubinstein's alternatingoffers, infinite- horizon bargaining game. The MESS concept modifies the idea of an neutrally stable strategy by favoring a simple strategy over a more complex strategy when both yield the same pay-off. Our complexity notion is weaker than the common practice of counting states in automata. If strategy A is a MESS, then the use of A by both play- ers is a Nash equilibrium in which an agreement is achieved immediately, and neither player would be willing to delay the agreement by one period in order to achieve the other player's share of the surplus. Each player's share of the surplus is then bounded between the shares received by the two players in the unique subgame-perfect equilibrium of Rubinstein's game. As the probability of a breakdown in negotiations becomes small (or discount factors become large), these bounds collapse on the subgame-perfect equilib- rium. These results continue to hold when offers must be made in multiples of a smallest monetary unit.
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Paper provided by ESRC Centre on Economics Learning and Social Evolution in its series ELSE working papers with number
039.
Find related papers by JEL classification: C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
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