On Risk Aversion in the Rubinstein Bargaining Game
We derive closed-form solutions for the Rubinstein alternating offers game for cases where the two players have (possibly asymmetric) utility functions that belong to the HARA class and discount the future at a constant rate. We show that risk aversion may increase a bargainers payoff. This result - which contradicts Roth’s 1985 theorem tying greater risk neutrality to a smaller payoff - does not rely on imperfect information or departures from expected utility maximization.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: CV4 7AL COVENTRY|
Phone: +44 (0) 2476 523202
Fax: +44 (0) 2476 523032
Web page: http://www2.warwick.ac.uk/fac/soc/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jeremy A.Rogoff Bulow & Kenneth, 1986.
"A Constant Recontracting Model of Sovereign Debt,"
University of Chicago - George G. Stigler Center for Study of Economy and State
43, Chicago - Center for Study of Economy and State.
- Jeremy I. Bulow & Kenneth Rogoff, 1986. "A Constant Recontracting Model of Sovereign Debt," NBER Working Papers 2088, National Bureau of Economic Research, Inc.
- Bulow, Jeremy & Rogoff, Kenneth S., 1989. "A Constant Recontracting Model of Sovereign Debt," Scholarly Articles 12491028, Harvard University Department of Economics.
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
252, David K. Levine.
- Volij, Oscar & Winter, Eyal, 2002.
"On risk aversion and bargaining outcomes,"
Games and Economic Behavior,
Elsevier, vol. 41(1), pages 120-140, October.
- 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.
- Roth, Alvin E & Rothblum, Uriel G, 1982. "Risk Aversion and Nash's Solution for Bargaining Games with Risky Outcomes," Econometrica, Econometric Society, vol. 50(3), pages 639-47, May.
- Merton, Robert C., 1971.
"Optimum consumption and portfolio rules in a continuous-time model,"
Journal of Economic Theory,
Elsevier, vol. 3(4), pages 373-413, December.
- R. C. Merton, 1970. "Optimum Consumption and Portfolio Rules in a Continuous-time Model," Working papers 58, Massachusetts Institute of Technology (MIT), Department of Economics.
- Binmore, Ken & Osborne, Martin J. & Rubinstein, Ariel, 1992.
"Noncooperative models of bargaining,"
Handbook of Game Theory with Economic Applications,
in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 7, pages 179-225
- Roth, Alvin E, 1985. "A Note on Risk Aversion in a Perfect Equilibrium Model of Bargaining," Econometrica, Econometric Society, vol. 53(1), pages 207-11, January.
- Roth, Alvin E, 1989. "Risk Aversion and the Relationship between Nash's Solution and Subgame Perfect Equilibrium of Sequential Bargaining," Journal of Risk and Uncertainty, Springer, vol. 2(4), pages 353-65, December.
When requesting a correction, please mention this item's handle: RePEc:wrk:warwec:878. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Robyn Till)
If references are entirely missing, you can add them using this form.