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Perfect Equilibria in a Negotiation Model with Different Time Preferences

Author

Listed:
  • Harold Houba

    () (Vrije Universiteit and Tinbergen Institute)

  • Quan Wen

    () (Department of Economics, Vanderbilt University)

Abstract

The players behave quite differently in the negotiation model under different time preferences than under common time preferences. Conventional analysis in this literature relies on the key presumption that all continuation payoffs are bounded from above by the bargaining frontier resulted from stationary contracts. When players have different time preferences, however, intertemporal trade may lead to continuation payoffs above the bargaining frontier. In this paper, we provide a thorough study of this problem when players have different time preferences. Our results tie up all the previous findings, and also clarify the confusion that arose in the past.

Suggested Citation

  • Harold Houba & Quan Wen, 2006. "Perfect Equilibria in a Negotiation Model with Different Time Preferences," Vanderbilt University Department of Economics Working Papers 0706, Vanderbilt University Department of Economics.
  • Handle: RePEc:van:wpaper:0706
    as

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    References listed on IDEAS

    as
    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring.
    3. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
    4. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, November.
    5. 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.
    6. repec:cup:apsrev:v:97:y:2003:i:01:p:123-133_00 is not listed on IDEAS
    7. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, October.
    8. Bolt, Wilko, 1995. "Striking for a Bargain between Two Completely Informed Agents: Comment," American Economic Review, American Economic Association, vol. 85(5), pages 1344-1347, December.
    9. Busch, Lutz-Alexander & Wen, Quan, 2001. "Negotiation games with unobservable mixed disagreement actions," Journal of Mathematical Economics, Elsevier, vol. 35(4), pages 563-579, July.
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    13. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796.
    14. Houba, Harold, 1997. "The policy bargaining model," Journal of Mathematical Economics, Elsevier, vol. 28(1), pages 1-27, August.
    15. Takahashi, Satoru, 2005. "Infinite horizon common interest games with perfect information," Games and Economic Behavior, Elsevier, vol. 53(2), pages 231-247, November.
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    More about this item

    Keywords

    Bargaining; negotiation; time preference; endogenous threats;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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