Subgame Perfect Equilibrium in a Bargaining Model with Deterministic Procedures

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• Mao, Liang
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Abstract

Two players, $A$ and $B$, bargain to divide a perfectly divisible pie. In a bargaining model with constant discount factors, $\delta_A$ and $\delta_B$, we extend \cite{Rubinstein82}'s alternating offers procedures to more general deterministic procedures so that any player in any period can be the proposer. We show that each bargaining game with a deterministic procedure has a unique subgame perfect equilibrium (SPE) payoff outcome, which is efficient. Conversely, each efficient division of the pie can be supported as an SPE outcome by some procedure if $\delta_A+\delta_B\geq 1$, while almost no division can ever be supported in SPE if \$\delta_A+\delta_B

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File URL: https://mpra.ub.uni-muenchen.de/67859/1/MPRA_paper_67859.pdf
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 67859.

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1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
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8. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, January.
9. Fershtman, Chaim, 1990. "The importance of the agenda in bargaining," Games and Economic Behavior, Elsevier, vol. 2(3), pages 224-238, September.
10. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, January.
11. Muthoo, Abhinay, 1990. "Bargaining without commitment," Games and Economic Behavior, Elsevier, vol. 2(3), pages 291-297, September.
12. Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-1364, November.
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