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Bargaining with Absentmindedness

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  • Cole Wittbrodt

Abstract

Delay is the norm in bargaining. I propose a novel source of bargaining delay: absentmindedness. Instead of interpreting absentmindedness as a literal memory friction, I use absentmindedness to represent a broader form of bounded rationality in dynamic games where players cannot perfectly track a game's progression. Bargainers unable to finely condition play on the stage of dynamic interaction can credibly refuse last-minute ultimatums. Other parties that anticipate this behavior are driven to offer preemptive concessions to avoid a breakdown in negotiations. Absentmindedness is thus a source of bargaining power, even for players who never make offers. This bargaining power comes at the cost of efficiency; I show that there can be equilibria where offers are rejected on the path of play.

Suggested Citation

  • Cole Wittbrodt, 2025. "Bargaining with Absentmindedness," Papers 2509.05828, arXiv.org, revised Mar 2026.
    • Handle: RePEc:arx:papers:2509.05828
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    References listed on IDEAS

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    1. Van Damme, Eric & Selten, Reinhard & Winter, Eyal, 1990. "Alternating bid bargaining with a smallest money unit," Games and Economic Behavior, Elsevier, vol. 2(2), pages 188-201, June.
    2. Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
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