Bargining and Investment
The focus of this paper is on repeated bargaining games in which two parties can decide how much to invest and how to share the remaining surplus for their own consumption. The game is dynamic since the current level of investment affects future surpluses. We characterise an MPE without delays in general terms and show the parametrical effects for the specific case in which parties share the surplus equally. We show that the relatively more patient player invests more than his opponent, for a given capital stock. Moreover, if the probability of becoming a proposer decreases for the more patient player, then such a player reduces his investment, while the relatively impatient player increases his investment.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 0141 330 4618
Fax: 0141 330 4940
Web page: http://www.gla.ac.uk/schools/business/research/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- repec:cup:cbooks:9780521576475 is not listed on IDEAS
- Muthoo Abhinay, 1995.
"Bargaining in a Long-Term Relationship with Endogenous Termination,"
Journal of Economic Theory,
Elsevier, vol. 66(2), pages 590-598, August.
- Abhinay Muthoo, . "Bargaining in a Long-Term Relationbship with Endogenous Termination," Economics Discussion Papers 422, University of Essex, Department of Economics.
- F. Gul, 2000.
"Unobservable Investment and the Hold-Up Problem,"
Princeton Economic Theory Papers
00s10, Economics Department, Princeton University.
- Muthoo, Abhinay, 1998. "Sunk Costs and the Inefficiency of Relationship-Specific Investment," Economica, London School of Economics and Political Science, vol. 65(257), pages 97-106, February.
When requesting a correction, please mention this item's handle: RePEc:gla:glaewp:2005_6. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jeanette Findlay)
If references are entirely missing, you can add them using this form.