Malice in the Rubinstein bargaining game

This is the first paper to incorporate malice into the Rubinstein alternating offers bargaining game. Initially, I examine outcomes with one-sided malice, allowing one of the bargaining players to be malicious in the sense that he obtains a positive payoff in every period in which the other player does not obtain any piece of the pie. This “malice payoff” is independent of whether the malicious player himself obtains the pie or not. I identify a unique SPNE of the bargaining game, and find that malice confers bargaining advantage; if the respondent is malicious, this can in some cases completely erode and even reverse first mover advantage. I then examine two-sided malice. I find that the proposer’s share when both players are malicious may either increase or decrease relative to the traditional Rubinstein shares. Even with two-sided malice, the proposer may end up with a lower share than the respondent. The results remain qualitatively similar under an alternative “continuous” formulation of malice. I contrast them with the case of envious preferences.