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A Simple Bargaining Model where Parties Make Errors

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  • Van Essen, Matthew

Abstract

In this paper, we develop a bargaining model where parties (or their intermediaries) make errors when reporting their bid. We characterize the Nash equilibria of the game and show that there is a unique equilibrium where trade takes place. This trade equilibrium is shown to converge to the Nash Bargaining Solution of the problem as trembles diminish. Finally, we discuss our results in the context of the previous literature providing a critique of the model and analysis found in Carlsson (1991).

Suggested Citation

  • Van Essen, Matthew, 2014. "A Simple Bargaining Model where Parties Make Errors," MPRA Paper 58952, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:58952
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    File URL: https://mpra.ub.uni-muenchen.de/58952/1/MPRA_paper_58952.pdf
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    References listed on IDEAS

    as
    1. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
    2. Kaneko, Mamoru, 1981. "A bilateral monopoly and the nash cooperative solution," Journal of Economic Theory, Elsevier, vol. 24(3), pages 311-327, June.
    3. Carlsson, Hans, 1991. "A Bargaining Model Where Parties Make Errors," Econometrica, Econometric Society, vol. 59(5), pages 1487-1496, September.
    4. Young H. P., 1993. "An Evolutionary Model of Bargaining," Journal of Economic Theory, Elsevier, vol. 59(1), pages 145-168, February.
    5. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    6. David Malueg, 2010. "Mixed-strategy equilibria in the Nash Demand Game," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(2), pages 243-270, August.
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    Cited by:

    1. Roberto Serrano, 2020. "Sixty-Seven Years of the Nash Program: Time for Retirement?," Working Papers 2020-20, Brown University, Department of Economics.
    2. Roberto Serrano, 2021. "Sixty-seven years of the Nash program: time for retirement?," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 12(1), pages 35-48, March.

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    More about this item

    Keywords

    Nash Program; Nash Bargaining Solution; Equilibrium Selection; Nash Demand Game;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • 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

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