In this paper we study an alternating-offers bargaining model in which the set of possible utility pairs evolves through time in a non-stationary, but smooth manner. In general there exists a multiplicity of subgame perfect equilibria. However, we show that in the limit as the time interval between two consecutive offers becomes arbitrarily small, there exists a unique subgame perfect equilibrium. Furthermore, and more importantly, we derive a powerful characterization of the unique (limiting) subgame perfect equilibrium payoffs, which should prove especially useful in applications. We then explore the circumstances under which Nash's bargaining solution implements this bargaining equilibrium. Finally, we extend our results to the case when the players have time-varying inside options.
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Paper provided by Institute for Labour Research in its series ILR working papers with number
051.
Length: 26 Date of creation: Feb 2000 Date of revision: Handle: RePEc:esl:ilrdps:051
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Find related papers by JEL classification: C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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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.:
Mortensen, Dale T, 1999.
"Equilibrium Unemployment Dynamics,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 889-914, November.
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