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Commitment in Alternating Offers Bargaining

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Author Info

  • Miettinen, Topi

    ()
    (Stockholm Institute of Transition Economics)

  • Perea, Andrés

    ()
    (Maastricht University, Department of Quantitative Economics)

Abstract

We 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 Info

Paper provided by Stockholm Institute of Transition Economics, Stockholm School of Economics in its series SITE Working Paper Series with number 8.

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Length: 12 pages
Date of creation: 17 Nov 2009
Date of revision:
Handle: RePEc:hhs:hasite:0008

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Postal: Stockholm Institute of Transition Economics, Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Phone: (+46 8) 736 9670
Fax: (+46 8) 31 64 22
Web page: http://www.hhs.se/site/
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Keywords: alternating offer bargaining; bargaining power; commitment; epistemic game theory; patience;

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