Reinterpreting The Meaning Of Breakdown
AbstractAlternating bargaining has been extensively used to model two-sidednegotiations. The celebrated model of Rubinstein (1982) has provided a formaljustification for equitable payoff division. A typical assumption of these models underrisk is that the breakdown event means a complete and irrevocable halt in negotiations.We reinterpret the meaning of breakdown as the imposition to finish negotiationsimmediately. Specifically, after breakdown the last offer becomes definitive. WhileRubinstein¿s model predicts an immediate agreement with stationary strategies, weshow that the same payoff allocation is attainable under non-stationary strategies.Moreover, the payoffs in delayed equilibria are potentially better for the proposer thanthose in which agreement is immediately reached.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2006-22.
Length: 21 pages
Date of creation: Nov 2006
Date of revision:
Publication status: Published by Ivie
breakdown; bargaining; delay.;
Other versions of this item:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-12-01 (All new papers)
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