Markov bargaining games
AbstractI consider an alternating offer bargaining game which is played by a risk neutral buyer and seller, where the value of the good to be traded follows a Markov process. For these games the existence of a perfect equilibrium is proved and the set of equilibrium payoffs and strategies are characterised. The main results are (a) if the buyer is less patient than the seller, then there will be delays in the players reaching an agreement, the buyer is forced into a suboptimal consumption policy and the equilibrium is ex-ante inefficient, and (b) if the buyer is more patient than the seller, then there is a unique and efficient equilibrium where agreement is immediate.
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Bibliographic InfoPaper provided by University College London in its series Open Access publications from University College London with number http://discovery.ucl.ac.uk/16384/.
Date of creation: Mar 1998
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Publication status: Published in Journal of Economic Dynamics and Control (1998-03) v.22, p.341-355
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