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Reinterpreting the meaning of breakdown

  • Juan Vidal-Puga

    (Universidade de Vigo)

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.

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File URL: http://econwpa.repec.org/eps/game/papers/0501/0501004.pdf
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Paper provided by EconWPA in its series Game Theory and Information with number 0501004.

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Length: 30 pages
Date of creation: 31 Jan 2005
Date of revision:
Handle: RePEc:wpa:wuwpga:0501004
Note: Type of Document - pdf; pages: 30
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Paola Manzini & Marco Mariotti, 2004. "Going Alone Together: Joint Outside Options in Bilateral Negotiations," Economic Journal, Royal Economic Society, vol. 114(498), pages 943-960, October.
  2. Clara Ponsati & Jozsef Sakovics, 2004. "Randomly Available Outside Options in Bargaining," ESE Discussion Papers 63, Edinburgh School of Economics, University of Edinburgh.
  3. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  4. Yossi Feinberg & Andrzej Skrzypacz, 2005. "Uncertainty about Uncertainty and Delay in Bargaining," Econometrica, Econometric Society, vol. 73(1), pages 69-91, 01.
  5. Manzini, Paola, 1996. "Strategic bargaining with destructive power," Discussion Papers 9619, Exeter University, Department of Economics.
  6. Olivier Compte & Philippe Jehiel, 2002. "On the Role of Outside Options in Bargaining with Obstinate Parties," Econometrica, Econometric Society, vol. 70(4), pages 1477-1517, July.
  7. Ana MAULEON & Vincent J. VANNETELBOSCH, 2001. "Bargaining with Endogenous Deadlines," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  8. Fershtman Chaim & Seidmann Daniel J., 1993. "Deadline Effects and Inefficient Delay in Bargaining with Endogenous Commitment," Journal of Economic Theory, Elsevier, vol. 60(2), pages 306-321, August.
  9. Avery Christopher & Zemsky Peter B., 1994. "Money Burning and Multiple Equilibria in Bargaining," Games and Economic Behavior, Elsevier, vol. 7(2), pages 154-168, September.
  10. repec:cup:cbooks:9780521576475 is not listed on IDEAS
  11. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
  12. Jehiel, Philippe & Moldovanu, Benny, 1995. "Negative Externalities May Cause Delay in Negotiation," Econometrica, Econometric Society, vol. 63(6), pages 1321-35, November.
  13. Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-64, November.
  14. Avner Shaked, 1994. "Opting out: bazaars versus "hi tech" markets," Investigaciones Economicas, Fundación SEPI, vol. 18(3), pages 421-432, September.
  15. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
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