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Subgame Perfect Equilibrium in a Bargaining Model with Deterministic Procedures

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

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    Date of creation: 07 Sep 2015
    Handle: RePEc:pra:mprapa: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.
    2. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
    3. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    4. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, October.
    5. Anesi, Vincent & Seidmann, Daniel J., 2014. "Bargaining over an endogenous agenda," Theoretical Economics, Econometric Society, vol. 9(2), May.
    6. Fudenberg, Drew & Levine, David, 1983. "Subgame-perfect equilibria of finite- and infinite-horizon games," Journal of Economic Theory, Elsevier, vol. 31(2), pages 251-268, December.
    7. Yuan Ju & David Wettstein, 2009. "Implementing cooperative solution concepts: a generalized bidding approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 39(2), pages 307-330, May.
    8. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
    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, December.
    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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