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Evolutionary Stability in Alternating-Offers Bargaining Games

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Author Info
Ken Binmore
Michele Piccione
Larry Samuelson
Abstract

This paper characterizes modified evolutionarily stable strategies (messes) in Rubinstein's alternating-offers, infinite-horizon bargaining game. The mess concept modifies the idea of a neutrally stable strategy by favoring a simple strategy over a more complex strategy when both yield the same payoff. We show that if strategy A is a mess, then the use of A by both players is a Nash equilibriumin 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 equilibrium. 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 041.

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Handle: RePEc:els:esrcls:041

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Related research
Keywords: Bargaining; Alternating offers; Subgame perfection; Evolution-ary stability;

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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

References listed on IDEAS
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  1. Abreu, Dilip & Rubinstein, Ariel, 1988. "The Structure of Nash Equilibrium in Repeated Games with Finite Automata," Econometrica, Econometric Society, vol. 56(6), pages 1259-81, November. [Downloadable!] (restricted)
  2. Banks, Jeffrey S. & Sundaram, Rangarajan K., 1990. "Repeated games, finite automata, and complexity," Games and Economic Behavior, Elsevier, vol. 2(2), pages 97-117, June. [Downloadable!] (restricted)
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  1. Hamid Sabourian & Jihong Lee, 2004. "Complexity and Efficiency in the Negotiation Game," Econometric Society 2004 North American Winter Meetings 82, Econometric Society. [Downloadable!]
  2. Jihong Lee & Hamid Sabourian, 2005. "Efficiency in Negotiation: Complexity and Costly Bargaining," Birkbeck Working Papers in Economics and Finance 0505, Birkbeck, Department of Economics, Mathematics & Statistics. [Downloadable!]
  3. Hamid Sabourian & Jihong Lee, 2004. "Complexity and Efficiency in Repeated Games with Negotiation," Econometric Society 2004 North American Summer Meetings 58, Econometric Society. [Downloadable!]
    Other versions:
  4. Torstensson, Pär, 2005. "Evolutionary Stability in Bargaining with an Asymmetric Breakdown Point," Working Papers 2005:38, Lund University, Department of Economics. [Downloadable!]
  5. Napel, Stefan & Widgren, Mika, 2003. "Bargaining and Distribution of Power in the EU's Conciliation Committee," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  6. Hamid Sabourian, 2000. "Bargaining and Markets: Complexity and the Walrasian Outcome," Cowles Foundation Discussion Papers 1249, Cowles Foundation, Yale University. [Downloadable!]
  7. Lee, J. & Sabourian, H., 2004. "Complexity and Efficiency in Repeated Games and Negotiation," Cambridge Working Papers in Economics 0419, Faculty of Economics, University of Cambridge. [Downloadable!]
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This page was last updated on 2009-12-21.

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