Nash meets Rubinstein in final-offer arbitration
I consider a final-offer arbitration model in which the offers are submitted sequentially, the parties are allowed to accept offers, and the arbitrator maximizes Nash's social welfare function. I show that backwards induction in this three-period model leads to the subgame-perfect equilibrium outcome of Rubinstein's infinite-horizon alternating-offer bargaining game.
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- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
252, David K. Levine.
- Crawford, Vincent P, 1979. "On Compulsory-Arbitration Schemes," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 131-59, February.
- Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
- Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
- Ken Binmore & Avner Shared & John Sutton, 1989. "An Outside Option Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 753-770.
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