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Optimism, delay and (in)efficiency in a stochastic model of bargaining

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  • Ortner, Juan

Abstract

I study a bilateral bargaining game in which the size of the surplus follows a stochastic process and in which players might be optimistic about their bargaining power. Following Yildiz (2003), I model optimism by assuming that players have different beliefs about the recognition process. I show that the unique subgame perfect equilibrium of this game might involve inefficient delays. I also show that these inefficiencies disappear when players can make offers arbitrarily frequently.

Suggested Citation

  • Ortner, Juan, 2013. "Optimism, delay and (in)efficiency in a stochastic model of bargaining," Games and Economic Behavior, Elsevier, vol. 77(1), pages 352-366.
    • Handle: RePEc:eee:gamebe:v:77:y:2013:i:1:p:352-366
    DOI: 10.1016/j.geb.2012.10.015
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    References listed on IDEAS

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    Cited by:

    1. Gieczewski, Germán, 2025. "Evolving wars of attrition," Journal of Economic Theory, Elsevier, vol. 224(C).
    2. Myatt, David P., 2025. "The impact of perceived strength in the war of attrition," Games and Economic Behavior, Elsevier, vol. 150(C), pages 260-277.
    3. Alp Simsek & Muhamet Yildiz, 2016. "Durability, Deadline, and Election Effects in Bargaining," NBER Working Papers 22284, National Bureau of Economic Research, Inc.
    4. Ortner, Juan, 2017. "A theory of political gridlock," Theoretical Economics, Econometric Society, vol. 12(2), May.

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    Keywords

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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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