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Unique Inneficient Perfect Equilibrium in a Stochastic Model of Bargaining with Complete Information

Listed author(s):
  • Taiji Furusawa

    ()

    (Department of Economics, Boston University)

  • Quan Wen

    ()

    (Department of Economics, Vanderbilt University)

We consider a two-player strategic bargaining model with discounting in which (i) the interim disagreement point in each period is stochastically determined at the beginning of the period, and (ii) the proposing player can delay in making an offer. Unlike many other bargaining models of complete information, in which inefficient perfect equilibrium outcomes are caused by the multiplicity of perfect equilibrium outcomes, our model has a unique perfect equilibrium payoff in most of the cases. For some parameter values, the perfect equilibrium is inefficient since it has a stochastically delayed agreement. We show that both (i) and (ii) are also necessary for the unique inefficient equilibrium outcome in our model.

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File URL: http://www.accessecon.com/pubs/VUECON/vu01-w21.pdf
File Function: First version, 2001
Download Restriction: no

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0121.

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Date of creation: Sep 2001
Handle: RePEc:van:wpaper:0121
Contact details of provider: Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

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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. Jehiel, Philippe & Moldovanu, Benny, 1995. "Negative Externalities May Cause Delay in Negotiation," Econometrica, Econometric Society, vol. 63(6), pages 1321-1335, November.
  3. Riddell, W Craig, 1981. "Bargaining under Uncertainty," American Economic Review, American Economic Association, vol. 71(4), pages 579-590, September.
  4. Merlo, Antonio & Wilson, Charles A, 1995. "A Stochastic Model of Sequential Bargaining with Complete Information," Econometrica, Econometric Society, vol. 63(2), pages 371-399, March.
  5. Chun, Youngsub & Thomson, William, 1990. "Nash solution and uncertain disagreement points," Games and Economic Behavior, Elsevier, vol. 2(3), pages 213-223, September.
  6. Manzini, Paola, 1999. "Strategic bargaining with destructive power," Economics Letters, Elsevier, vol. 65(3), pages 315-322, December.
  7. Chatterjee, Kalyan & Samuelson, Larry, 1990. "Perfect Equilibria in Simultaneous-Offers Bargaining," International Journal of Game Theory, Springer;Game Theory Society, vol. 19(3), pages 237-267.
  8. Perry Motty & Reny Philip J., 1993. "A Non-cooperative Bargaining Model with Strategically Timed Offers," Journal of Economic Theory, Elsevier, vol. 59(1), pages 50-77, February.
  9. Busch, Lutz-Alexander & Wen, Quan, 1995. "Perfect Equilibria in Negotiation Model," Econometrica, Econometric Society, vol. 63(3), pages 545-565, May.
  10. Bossert, Walter & Nosal, Ed & Sadanand, Venkatraman, 1996. "Bargaining under Uncertainty and the Monotone Path Solutions," Games and Economic Behavior, Elsevier, vol. 14(2), pages 173-189, June.
  11. Fernandez, Raquel & Glazer, Jacob, 1991. "Striking for a Bargain between Two Completely Informed Agents," American Economic Review, American Economic Association, vol. 81(1), pages 240-252, March.
  12. Chun, Youngsub & Thomson, William, 1990. "Bargaining with Uncertain Disagreement Points," Econometrica, Econometric Society, vol. 58(4), pages 951-959, July.
  13. Lutz-Alexander Bush & Shouyong Shi & Quan Wen, 1998. "Bargaining with Surplus Destruction," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 915-932, November.
  14. 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.
  15. Haller, Hans & Holden, Steinar, 1990. "A letter to the editor on wage bargaining," Journal of Economic Theory, Elsevier, vol. 52(1), pages 232-236, October.
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