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Stationarity, Rationalizability and Bargaining

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  • In-Koo Cho

Abstract

Without assuming rational expectations, we examine the implications of a stationarity assumption in a standard bargaining model with one-sided incomplete information, where the seller makes an offer in each period. Instead of computing a weakly stationary equilibrium, we invoke rationalizability (Bernheim (1984) and Pearce (1984)) combined with the restriction that the buyer's acceptance rule be weakly stationary. There exists a pair of rationalizable sets of pure strategies for the seller and the buyer which are weakly stationary. We demonstrate that any initial offer from the seller induced by a strategy rationalized by a weakly stationary acceptance rule for the buyer must entail the Coase property. Our result does not presume the selection of a particular equilibrium and follows directly from the weak stationarity assumption of the buyer's acceptance rule and the rational behaviour of the players.

Suggested Citation

  • In-Koo Cho, 1994. "Stationarity, Rationalizability and Bargaining," Review of Economic Studies, Oxford University Press, vol. 61(2), pages 357-374.
  • Handle: RePEc:oup:restud:v:61:y:1994:i:2:p:357-374.
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    File URL: http://hdl.handle.net/10.2307/2297985
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    Citations

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    Cited by:

    1. Roger Guesnerie, 2005. "Strategic Substitutabilities Versus Strategic Complementarities : Towards a General Theory of Expectational Coordination ?," Revue d'économie politique, Dalloz, vol. 115(4), pages 393-412.
    2. Vannetelbosch, Vincent J., 1996. "On Rationalizability in Two-Person Alternating-Offer Bargaining," LIDAM Discussion Papers IRES 1996023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    3. Pierpaolo Battigalli, 2006. "Rationalization In Signaling Games: Theory And Applications," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 67-93.
    4. Xiao Luo & Xuewen Qian & Chen Qu, 2020. "Iterated elimination procedures," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 70(2), pages 437-465, September.
    5. In-Koo Cho, 2004. "Monotonicity and Rationalizability in Large Uniform Price and Double Auctions," Theory workshop papers 658612000000000076, UCLA Department of Economics.
    6. Shimoji, Makoto & Watson, Joel, 1998. "Conditional Dominance, Rationalizability, and Game Forms," Journal of Economic Theory, Elsevier, vol. 83(2), pages 161-195, December.
    7. Battigalli, Pierpaolo, 2003. "Rationalizability in infinite, dynamic games with incomplete information," Research in Economics, Elsevier, vol. 57(1), pages 1-38, March.
    8. Vincent Vannetelbosch, 1999. "Alternating-Offer Bargaining and Common Knowledge of Rationality," Theory and Decision, Springer, vol. 47(2), pages 111-138, October.
    9. Xiao Luo & Xuewen Qian & Chen Qu, 0. "Iterated elimination procedures," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 0, pages 1-29.
    10. Kaya, Ayça & Liu, Qingmin, 2015. "Transparency and price formation," Theoretical Economics, Econometric Society, vol. 10(2), May.

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