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Self-control and bargaining

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  • Lu, Shih En

Abstract

This paper examines a bargaining game with alternating proposals where sophisticated quasi-hyperbolic discounters negotiate over an infinite stream of payoffs. In Markov perfect equilibrium, payoffs are almost always unique, and a small advantage in self-control can result in a large advantage in payoff. In subgame-perfect equilibrium, a multiplicity of payoffs and delay can arise, despite the complete information setting. Markov perfect equilibria are the best subgame-perfect equilibria for the agent with more self-control, and the worst for the agent with less self-control. Naïveté can help a player by increasing their reservation value.

Suggested Citation

  • Lu, Shih En, 2016. "Self-control and bargaining," Journal of Economic Theory, Elsevier, vol. 165(C), pages 390-413.
  • Handle: RePEc:eee:jetheo:v:165:y:2016:i:c:p:390-413
    DOI: 10.1016/j.jet.2016.05.003
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    References listed on IDEAS

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    Cited by:

    1. Lu, Shih En, 2016. "Models of limited self-control: Comparison and implications for bargaining," Economics Letters, Elsevier, vol. 145(C), pages 186-191.

    More about this item

    Keywords

    Self-control; Bargaining; Time inconsistency; Quasi-hyperbolic discounting;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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