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Bargaining and Reputation

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  • D. Abreu
  • F. Gul

Abstract

A complete information bargaining model is amended to accommodate "irrational types" who are inflexible in their offers and demands. An "independence of procedures" result is derived: the bargaining outcome is independent of the details of the bargaining protocol if players can make offers frequently. In the limiting continuous-time game, equilibrium is unique, and entails delay, consequently inefficiency. As the probability of irrationality goes to zero, delay and inefficiency disappear; furthermore, if there are a rich set of types for both agents, their limit equilibrium payoffs are inversely proportional to their rates of time preference.
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Suggested Citation

  • D. Abreu & F. Gul, 1998. "Bargaining and Reputation," Princeton Economic Theory Papers 00s9, Economics Department, Princeton University.
  • Handle: RePEc:wop:prinet:00s9
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    References listed on IDEAS

    as
    1. Hermalin, Benjamin E & Katz, Michael L, 1991. "Moral Hazard and Verifiability: The Effects of Renegotiation in Agency," Econometrica, Econometric Society, vol. 59(6), pages 1735-1753, November.
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