History-dependent Reciprocity in Alternating Offer Bargaining
This paper studies alternating-offer bargaining with players who have history-dependent reciprocity preferences. To allow for reciprocal motiva¬tion, the existing history-dependent models are modified by reversing the way aspirations depend on previous offers. The model exhibits a unique equilibrium where an agreement is reached immediately. As the players' discount factors approach unity, players share the pie according to the golden division: the responder's share of the whole pie coincides with the ratio of the proposer's and the responder's shares. Thus, there is a first-mover disadvantage.
Volume (Year): 23 (2010)
Issue (Month): 1 (Spring)
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