Alternating offers bargaining has been extensively used to model two-sided negotiations. The celebrated model of Rubinstein [Econometrica 50(1):97–109, 1982] has provided a formal justification for equitable payoff division. A typical assumption of these models under risk is that the termination event means a complete and irrevocable breakdown in negotiations. In this paper, the meaning of termination is reinterpreted as the imposition to finish negotiations immediately. Specifically, bargaining terminates when the last offer becomes definitive. While Rubinstein’s model predicts an immediate agreement with stationary strategies, we show that the same payoff allocation is attainable under non-stationary strategies. Moreover, the payoffs in delayed equilibria are potentially better for the proposer than those in which agreement is immediately reached.
Breakdown Bargaining Delay
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