Bargaining, Efficiency and the Repeated Prisoners' Dilemna
AbstractThe infinitely repeated prisoners' dilemma has a multiplicity of Pareto-unranked equilibria. This leads to a battle of the sexes problem of coordinating on a single efficient outcome. One natural method of achieving coordination is for the players to bargain over the set of possible equilibrium allocations. If players have different preferences over cooperative bargaining solutions, it is reasonable to imagin that agents randomize over their favorite choices. This paper asks the following question: do the players risk choosing an inefficient outcome by resorting to such randomizations? In general, randomizations over points in a convex set yields interior points. We show, however, that if the candidate solutions are the two most frequently used the Nash and Kalai-Smorodinsky solutions then for any prisoners'' dilemma, this procedure guarantees coordination of an efficient outcome.
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Bibliographic InfoPaper provided by Bell Communications - Economic Research Group in its series Papers with number 91.
Length: 4 pages
Date of creation: 1992
Date of revision:
Contact details of provider:
Postal: Bell Communications Research; Economic Research Group, 445 South street Morristown, NJ 07962-1910, USA
Other versions of this item:
- John Conley & Bhaskar Chakravorti, 2004. "Bargaining efficiency and the repeated prisoners' dilemma," Economics Bulletin, AccessEcon, vol. 3(3), pages 1-8.
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
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