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Reinterpreting the meaning of breakdown

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  • Juan Vidal-Puga

    (Universidade de Vigo)

Abstract

A typical assumption of the standard alternating-offers model under risk is that the breakdown event means a complete and irrevocable halt in negotiations. We reinterpret the meaning of breakdown as the imposition to finish negotiations immediately. Specifically, after breakdown the last offer becomes definitive. A full characterization of the set of subgame perfect equilibrium payoffs is provided. We show that Rubinstein's allocation (1/(1+?),?/(1+?)) is obtained under non- stationary strategies. Moreover, the payoffs in delayed equilibria are potentially better for the proposer than those in which agreement is immediately reached.

Suggested Citation

  • Juan Vidal-Puga, 2005. "Reinterpreting the meaning of breakdown," Game Theory and Information 0501004, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpga:0501004
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    breakdown bargaining;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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