Commitment in Alternating Offers Bargaining
AbstractWe extend the Ståhl-Rubinstein alternating-offer bargaining procedure to allow players, prior to each bargaining round, to simultaneously and visibly commit to some share of the pie. If commitment costs are small but increasing in the committed share, then the unique outcome consistent with common belief in future rationality (Perea, 2009), or more restrictively subgame perfect Nash equilibrium, exhibits a second mover advantage. In particular, as the smallest share of the pie approaches zero, the horizon approaches in…nity, and commitment costs approach zero, the unique bargaining outcome corresponds to the reversed Rubinstein outcome (d/(1 + d); 1/(1 + d)).
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Bibliographic InfoPaper provided by Stockholm Institute of Transition Economics, Stockholm School of Economics in its series SITE Working Paper Series with number 8.
Length: 12 pages
Date of creation: 17 Nov 2009
Date of revision:
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alternating offer bargaining; bargaining power; commitment; epistemic game theory; patience;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
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