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Optimally Stubborn

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Abstract

I consider a bargaining game with two types of players – rational and stubborn. Rational players choose demands at each point in time. Stubborn players are restricted to choose from the set of "insistent" strategies that always make the same demand and never accept anything less. However, their initial choice of demand is unrestricted. I characterize the equilibria of this game. I show that while pooling equilibria exist, fully separating equilibria do not. Relative to the case with exogenous behavioral types, strong behavioral predictions emerge: in the limit, players randomize over at most two demands. However, unlike in a world with exogenous types, there is Folk-theorem-like payoff multiplicity.

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  • Anna Sanktjohanser, 2020. "Optimally Stubborn," Cowles Foundation Discussion Papers 2255, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:2255
    Note: Includes supplemental material
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    References listed on IDEAS

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    4. Drew Fudenberg & David K. Levine, 2008. "Maintaining a Reputation when Strategies are Imperfectly Observed," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 8, pages 143-161, World Scientific Publishing Co. Pte. Ltd..
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    Keywords

    Reputation; Bargaining; Behavioral types; War of attrition;
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