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Complexity and Efficiency in the Negotiation Game

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  • Hamid Sabourian
  • Jihong Lee

Abstract

This paper considers the ``negotiation game'' Busch and Wen (1995)) which combines the features of two-person alternating offers bargaining and repeated games. Despite the forces of bargaining, the negotiation game in general admits a large number of equilibria some of which involve delay and inefficiency. In order to isolate equilibria in this game, we investigate the role of complexity of implementing a strategy, introduced in the literature on repeated games played by automata. It turns out that when the players care for less complex strategies (at the margin) only efficient equilibria survive. Thus, complexity and bargaining in tandem may offer an explanation for co-operation and efficiency in repeated games

Suggested Citation

  • Hamid Sabourian & Jihong Lee, 2004. "Complexity and Efficiency in the Negotiation Game," Econometric Society 2004 North American Winter Meetings 82, Econometric Society.
    • Handle: RePEc:ecm:nawm04:82
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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